Document:

EXHIBIT
10.3(d)

 

2004 EQUITY COMPENSATION
PLAN

EMPLOYEE

NON-QUALIFIED STOCK
OPTION

 

GRANT
AGREEMENT

 

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

 

RECITALS

 

A.            The
Grantee has been granted an option to purchase shares of the common stock of
the Company under the Cephalon, Inc. 2004 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 the 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”).

 

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3.             Option Nontransferable.

 

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.

 

4.             Dates 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 employed by the Company 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.

 

5.             Termination of Employment.

 

(a)           Should
the Grantee cease to be an employee of the Company or one of its subsidiaries
(other than by reason of death, permanent disability or termination for cause),
this option will, solely to the extent that it is exercisable immediately prior
to such cessation of employee status, remain exercisable during the three-month
period following the date of such cessation of employee status.  If, at the time of the Grantee’s termination,
he is unable to sell Option Shares (i) without liability under Section 16(b) of

 

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the Securities Exchange
Act of 1934, as amended (or any successor provision) (“Section 16(b)”) or (ii)
because he is in possession of material non-public information about the Company
(“Non-public Information”), then the three-month period referred to in the
preceding sentence shall not commence until the later of the first day that the
Grantee may sell Option Shares without liability under Section 16(b) or the
first day that the Grantee is not in possession of Non-public Information;
provided, however, that in no event will this option be exercisable at any time
after the Expiration Date.

 

(b)           Should
the Grantee become permanently disabled and cease by reason thereof to be an
employee of the Company or one of its subsidiaries, this option will, solely to
the extent that it is exercisable immediately prior to such cessation of
employee status, remain exercisable during the one-year period following the
date of such cessation of employee status; 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.

 

(c)           Should
the Grantee die while still an employee of the Company or one of its
subsidiaries, this stock option, to the extent it is at the time outstanding
under this Plan, shall automatically accelerate and become fully exercisable as
to all Option Shares subject to this option and shall remain exercisable until
the Expiration Date or earlier surrender of this option.  In addition, if the Grantee dies during the
three-month period referred to in subparagraph (a) or during the one-year
period referred to in subparagraph (b), the option shall remain exercisable
until the Expiration Date or earlier surrender of this option.  The executors or administrators of estate or
heirs or legatees (as the case may be) will have the right to exercise this
option, during the remainder of the option term.

 

(d)           Should
the Grantee’s employment 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 

 

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terminate and cease to be
exercisable when notice of termination of employment is given.

 

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, the Grantee (or in the case of exercise
after the Grantee’s death, the 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
Committee 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 Committee may
approve; and

 

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(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 of Directors
(“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 

 

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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 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)           Except
as described below, in the event of any Corporate Transaction, this option, to
the extent it is at the time outstanding under the Plan, shall automatically
accelerate so that this option shall, immediately prior to the specified
effective date for such Corporate Transaction, become fully exercisable with
respect to the total number of Option Shares subject to the option and may be
exercised for all or any portion of such shares as fully-exercisable
shares.  However, the exercisability
shall not so accelerate if and to the extent: 
(i) such option is, in connection with such Corporate Transaction,
either to be assumed by the successor corporation or parent thereof or replaced
with a stock option for shares of the capital stock of the successor
corporation or parent thereof having comparable value and terms, (ii) such
option is to be replaced with a cash incentive option or award of the successor
corporation which preserves the option spread value existing at the time of
such Corporate Transaction and provides for subsequent payout in accordance
with the same terms and conditions of the option, (iii) such option is to be
replaced by a grant under another incentive program which the Committee
determines is reasonably equivalent in value, or (iv) the acceleration of the
exercisability period under the option is subject to other limitations imposed
by the Committee at the time of the Grant. 
The 

 

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determination of
comparability under clauses (i), (ii) or (iii) above shall be made by the
Committee, and its determination shall be final, binding and conclusive.

 

(e)           Upon
the Grantee’s cessation of service by reason of an Involuntary Termination
within thirty-six (36) months after a Corporate Transaction in which the
Grantee’s outstanding options are assumed or replaced pursuant to clauses (d)
(i), (ii) or (iii) above, each such option under clause (i) shall automatically
accelerate and become fully exercisable and all restrictions applicable to such
grants shall lapse, with respect to the total number of shares of stock at the
time subject to such option and the cash incentive program under clause (ii) or
other incentive program under clause (iii) shall become fully vested.  In addition, upon the Grantee’s cessation of
service by reason of an Involuntary Termination within 36 months after a Change
of Control, the option will automatically accelerate and become fully
exercisable with respect to the total number of Option Shares at the time
subject to the option.  The option as so
accelerated shall remain exercisable until the earlier of the Expiration
Date or the expiration of the one (1)-year period measured from the date of
such Involuntary Termination.

 

(f)            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 the 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, the 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.

 

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10.           Liability of Company.

 

(a)           If
the Option Shares exceed, as of the Grant Date, the number of shares that may
without shareholder approval be issued under the Plan, then this option will be
void with respect to such excess shares unless shareholder 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 the Grantee any right to continue in the
employ of the Company (or any subsidiary) 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 employment contract between the Company (or any
subsidiary) and the Grantee may expressly provide otherwise, neither the Company
nor any of its subsidiaries is under any obligation to continue the employment
of the Grantee for any period of specified duration.

 

12.           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
addressed to the Grantee at the address provided on the notice of grant or such
other address provided in writing by the Grantee to the Company.  All notices will be deemed to have been given
or delivered upon personal 

 

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delivery or upon deposit
in the U.S. mail, postage prepaid and properly addressed to the party to be
notified.

 

13.           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 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.

 

14.           Governing Law.

 

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

 

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS
WHEREOF, Cephalon 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.

 

	
   

  	
  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 shall be final and binding.

 

	
   

  	
  Grantee:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  

 

10EXHIBIT
10.3(e)

 

2004 EQUITY COMPENSATION
PLAN

EMPLOYEE

INCENTIVE STOCK OPTION

 

GRANT
AGREEMENT

 

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

 

RECITALS

 

A.            The
Grantee has been granted an option to purchase shares of the common stock of
the Company under the Cephalon, Inc. 2004 Equity Compensation Plan (“Plan”).

 

B.            The
option granted to the Grantee is intended to be an incentive stock option (“ISO”),
which is intended to satisfy the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”).

 

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 the Grantee, as of the Grant Date, a ISO 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.

 

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.

 

4.             Dates 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 employed by the Company 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.

 

5.             Termination of Employment.

 

(a)           Should
the Grantee cease to be an employee of the Company or one of its subsidiaries
(other than by reason of death, permanent disability or termination for cause),
this option will, solely to the extent that it is exercisable immediately prior
to such cessation of employee status, remain exercisable during the three-month
period following the date of such cessation of employee status.  If, at the time of the Grantee’s termination,
he is unable to sell Option Shares (i) without liability under Section 16(b) of

 

2

 

the Securities Exchange
Act of 1934, as amended (or any successor provision) (“Section 16(b)”) or (ii)
because he is in possession of material non-public information about the
Company (“Non-public Information”), then the three-month period referred to in
the preceding sentence shall not commence until the later of the first day that
the Grantee may sell Option Shares without liability under Section 16(b) or the
first day that the Grantee is not in possession of Non-public Information;
provided, however, that in no event will this option be exercisable at any time
after the Expiration Date.  Any portion
of the option that is exercised after the three-month period following the date
of such cessation of employee status, as permitted by the immediately preceding
sentence, shall be a non-qualified stock option.

 

(b)           Should
the Grantee become permanently disabled and cease by reason thereof to be an
employee of the Company or one of its subsidiaries, this option will, solely to
the extent that it is exercisable immediately prior to such cessation of
employee status, remain exercisable during the one-year period following the
date of such cessation of employee status; 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.

 

(c)           Should
the Grantee die while still an employee of the Company or one of its
subsidiaries, this stock option, to the extent it is at the time outstanding
under this Plan, shall automatically accelerate and become fully exercisable as
to all Option Shares subject to this option and shall remain exercisable until
the Expiration Date or earlier surrender of this option.  In addition, if the Grantee dies during the
three-month period referred to in subparagraph (a) or during the one-year
period referred to in subparagraph (b), the option shall remain exercisable
until the Expiration Date or earlier surrender of this option.  The executors or administrators of estate or
heirs or legatees (as the case may be) will have the right to exercise this
option, during the remainder of the option term.

 

(d)           Should
the Grantee’s employment be terminated for cause (including, but not limited
to, any act of dishonesty, unethical conduct, willful 

 

3

 

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 termination of employment is given.

 

6.             Designation as Incentive Stock Option.

 

(a)           This
option is designated as an incentive stock option within the meaning of Section
422 of the Code.  If the aggregate fair
market value of the Company’s stock on the date of the grant with respect to
which incentive stock options are exercisable for the first time by the Grantee
during any calendar year, under the Plan or any other stock option plan of the
Company or a parent or subsidiary, exceeds $100,000, then the option, as to the
excess, shall be treated as a nonqualified stock option that does not meet the
requirements of Section 422.  If and to
the extent that the option fails to qualify as an incentive stock option under
the Code, the option shall remain outstanding according to its terms as a
nonqualified stock option.

 

(b)           The
Grantee understands that favorable incentive stock option tax treatment is
available only if the option is exercised while the Grantee is an employee of
the Company or a parent or subsidiary of the Company or within a period of time
specified in the Code after the Grantee ceases to be an employee.  The Grantee understands that the Grantee is
responsible for the income tax consequences of the option, and, among other tax
consequences, the Grantee understands that he may be subject to the alternative
minimum tax under the Code in the year in which the option is exercised.  The Grantee will consult with his tax adviser
regarding the tax consequences of the option.

 

(c)           The
Grantee agrees that the Grantee shall immediately notify the Company in writing
if the Grantee sells or otherwise disposes of any Option Shares acquired upon
the exercise of the option and such sale or other disposition occurs on or
before the later of (i) two years after the Grant Date or (ii) one year after
the transfer of the shares upon the exercise of the option.  The Grantee also agrees to provide the
Company with any information requested by the Company with respect to such sale
or other disposition.

 

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7.             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.

 

8.             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, the Grantee (or in the case of exercise
after the Grantee’s death, the 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
Committee 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
Committee may approve; and

 

(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.

 

5

 

9.             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 of Directors
(“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 

 

6

 

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)           Except
as described below, in the event of any Corporate Transaction, this option, to
the extent it is at the time outstanding under the Plan, shall automatically
accelerate so that this option shall, immediately prior to the specified
effective date for such Corporate Transaction, become fully exercisable with
respect to the total number of Option Shares subject to the option and may be
exercised for all or any portion of such shares as fully-exercisable
shares.  However, the exercisability
shall not so accelerate if and to the extent: 
(i) such option is, in connection with such Corporate Transaction,
either to be assumed by the successor corporation or parent thereof or replaced
with a stock option for shares of the capital stock of the successor
corporation or parent thereof having comparable value and terms, (ii) such
option is to be replaced with a cash incentive option or award of the successor
corporation which preserves the option spread value existing at the time of
such Corporate Transaction and provides for subsequent payout in accordance
with the same terms and conditions of the option, (iii) such option is to be
replaced by a grant under another incentive program which the Committee
determines is reasonably equivalent in value, or (iv) the acceleration of the
exercisability period under the option is subject to other limitations imposed
by the Committee at the time of the Grant. 
The determination of comparability under clauses (i), (ii) or (iii)
above shall be made by the Committee, and its determination shall be final,
binding and conclusive.

 

7

 

(e)           Upon
the Grantee’s cessation of service by reason of an Involuntary Termination
within thirty-six (36) months after a Corporate Transaction in which the
Grantee’s outstanding options are assumed or replaced pursuant to clauses (d)
(i), (ii) or (iii) above, each such option under clause (i) shall automatically
accelerate and become fully exercisable and all restrictions applicable to such
grants shall lapse, with respect to the total number of shares of stock at the
time subject to such option and the cash incentive program under clause (ii) or
other incentive program under clause (iii) shall become fully vested.  In addition, upon the Grantee’s cessation of
service by reason of an Involuntary Termination within 36 months after a Change
of Control, the option will automatically accelerate and become fully exercisable
with respect to the total number of Option Shares at the time subject to the
option.  The option as so accelerated
shall remain exercisable until the earlier of the Expiration Date or the
expiration of the one (1)-year period measured from the date of such
Involuntary Termination.

 

(f)            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.

 

10.           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 the 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, the 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.

 

11.           Liability of Company.

 

(a)           If
the Option Shares exceed, as of the Grant Date, the number of shares that may
without shareholder approval be issued under the Plan, then 

 

8

 

this option will be void
with respect to such excess shares unless shareholder 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.

 

12.           No Employment Contract.

 

Nothing in this
Agreement, the Notice or in the Plan confers upon the Grantee any right to
continue in the employ of the Company (or any subsidiary) 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 employment contract between the
Company (or any subsidiary) and the Grantee may expressly provide otherwise,
neither the Company nor any of its subsidiaries is under any obligation to
continue the employment of the Grantee for any period of specified duration.

 

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 addressed
to the Grantee at the address provided on the notice of grant or such other
address provided in writing by the Grantee to the Company.  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.

 

9

 

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 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]

 

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IN WITNESS WHEREOF, Cephalon 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.

 

	
   

  	
  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 shall be final and binding.

 

	
   

  	
  Grantee:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  

 

11

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