Document:

Exhibit 10.2

 

CEPHALON, INC.

2010 EMPLOYEE STOCK
PURCHASE PLAN

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Purpose of the Plan

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Administration of the
  Plan

  	
  3

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Stock Subject to the
  Plan

  	
  3

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Offering Periods

  	
  3

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Eligibility

  	
  4

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Payroll Deductions

  	
  4

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Purchase Rights

  	
  5

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Accrual Limitations

  	
  9

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Effective Date and Term
  of the Plan

  	
  10

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Amendment and
  Termination

  	
  10

  
	
   

  	
   

  	
   

  
	
  12.

  	
  General Provisions

  	
  11

  
	
   

  	
   

  	
   

  
	
  Schedule A

  	
  A-1

  

 

i

 

1.                                      PURPOSE OF THE PLAN

 

The 2010 Cephalon, Inc. Employee Stock Purchase
Plan is intended to promote the interests of the Company (as defined in Article 2)
by providing Eligible Employees (as defined in Article 2) of a Participating
Employer (as defined in Article 2) with the opportunity to acquire a
proprietary interest in the Company through participation in an employee stock
purchase plan designed to qualify under section 423 of the Internal Revenue
Code of 1986, as amended.  The Plan (as
defined in Article 2) is not intended and shall not be construed as
constituting an “employee benefit plan” within the meaning of section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended.

 

2.                                      DEFINITIONS

 

(a)   “1933 Act” shall
mean the Securities Act of 1933, as amended.

 

(b)   “Board” shall
mean the Company’s Board of Directors.

 

(c)   “Code” shall
mean the Internal Revenue Code of 1986, as amended.

 

(d)   “Common Stock”
shall mean the common stock of the Company.

 

(e)   “Company Affiliate”
shall mean any parent or subsidiary corporation of the Company (as determined
in accordance with Code section 424), whether now existing or subsequently
established.

 

(f)    “Company” shall
mean Cephalon, Inc., and any corporate successor to all or substantially
all of the assets or voting stock of Cephalon, Inc. that shall adopt the
Plan.

 

(g)   “Compensation”
shall mean the regular base salary paid to a Participant by one or more
Participating Employers during the Participant’s period of participation in an
Offering Period under the Plan.  Such
Compensation shall be calculated before deduction of (A) any income or
employment tax withholdings or (B) any contributions made by the
Participant to any Code section 401(k) salary deferral plan, any Code section
125 cafeteria benefit program or any Code section 132(f)(4) transportation
fringe benefit program now or hereafter established by a Participating
Employer.  However, Compensation shall
not include any contributions made by a Participating Employer on the
Participant’s behalf to any employee benefit or welfare plan now or hereafter
established (other than Code section 401(k), Code section 125, or Code section
132(f)(4) contributions deducted from such Compensation).

 

(h)   “Effective Date”
shall mean May 20, 2010, subject to stockholder approval of the Plan.

 

(i)    “Eligible Employee”
shall mean any person who is employed by a Participating Employer as an
employee on a basis under which he or she is regularly expected to render more
than twenty hours of service per week for earnings to be considered wages under
Code section 3401(a).  Notwithstanding any provision contained in the Plan to the
contrary, any 

 

1

 

individual who is classified by a Participating Employer as
an independent contractor or who is otherwise treated by a Participating
Employer as other than an employee on its payroll records, shall not be an
Eligible Employee.

 

(j)    “ESPP Brokerage Account”
shall mean the brokerage account in which the shares of Common Stock purchased
on behalf of each Participant are deposited.

 

(k)   “Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended.

 

(l)    “Fair Market Value”
per share of Common Stock on any relevant date shall be determined in accordance
with the following provisions:

 

(i)            If
the Common Stock is at the time traded on a national securities exchange, then
the Fair Market Value shall be the closing selling price per share of Common
Stock on the date in question, on the stock exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange and
published in The Wall Street Journal or such
other source as the Board deems reliable. 
If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.

 

(ii)           If the Common
Stock is not publicly traded or, if publicly traded, is not subject to reported
transactions as set forth above, the Fair Market Value per share shall be as
determined by the Plan Administrator on the basis of available prices for such
Common Stock or in such manner as may be authorized by applicable regulations
under the Code.

 

(m)  “Offering Period”
shall mean the period during which shares of Common Stock shall be offered for
purchase under the Plan as described in Section 5.

 

(n)   “Participant”
shall mean any Eligible Employee of a Participating Employer who is actively
participating in the Plan.

 

(o)   “Participating Employer”
shall mean the Company and such Company Affiliates as may be authorized from
time to time by the Board to extend the benefits of the Plan to their Eligible
Employees.  The Participating Employers
in the Plan are listed in the attached Schedule A.

 

(p)   “2010  Plan” shall mean the Cephalon, Inc. 2010 Employee Stock
Purchase Plan, as set forth in this document, and as amended from time to time.

 

(q)   “Plan Administrator”
shall mean the committee appointed by the Board to administer the Plan.

 

2

 

(r)    “Purchase Date”
shall mean the last business day of each Offering Period.  The initial Purchase Date shall be December 31,
2010.

 

3.                                      ADMINISTRATION OF THE PLAN

 

The Plan Administrator shall have full discretionary
authority to interpret and construe any provision of the Plan and to adopt such
rules and regulations for administering the Plan as it may deem necessary
in order to comply with the requirements of Code section 423.  Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.  As a condition of participating in the Plan,
all Participants must acknowledge, in writing or by completing the enrollment
forms to participate in the Plan, that all decisions and determinations of the
Plan Administrator shall be final and binding on the Participant, his or her
beneficiaries and any other person having or claiming an interest under the
Plan on behalf of the Participant.  The
Plan Administrator may delegate its ministerial duties to one or more
subcommittees or to a third party administrator, as it deems appropriate.

 

4.                                      STOCK SUBJECT TO PLAN

 

(a)   Number of Shares.  Subject to adjustment as described below, the
aggregate number of shares of Common Stock that may be issued or transferred
under the Plan is 350,000 shares.  The
stock purchasable under the Plan may be shares of authorized but unissued or
reacquired Common Stock, including shares of Common Stock purchased on the open
market.

 

(b)   Adjustment.  If there is any change in the number or kind
of shares of Common Stock outstanding by reason of any stock split or reverse
stock split, stock dividend, spinoff, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Company’s receipt of consideration, the Plan Administrator
shall make appropriate adjustments to (i) the maximum number and class of securities
issuable under the Plan, (ii) the maximum number and class of securities
purchasable per Participant on any Purchase Date, and (iii) the number and
class of securities and the price per share in effect under each outstanding
purchase right, in order to prevent the dilution or enlargement of benefits
thereunder.  In addition, the Plan
Administrator shall have discretion to make the foregoing equitable adjustments
in any circumstances in which an adjustment is not mandated by this Section 4(b) or
applicable law.  Any adjustments made by
the Plan Administrator shall be consistent with Code section 423 and shall be
final, binding and conclusive.

 

5.                                      OFFERING PERIODS

 

(a)   Offer of Shares.  Shares of Common Stock shall be offered for
purchase under the Plan through a series of consecutive Offering Periods until
such time as the Plan terminates as set forth in Section 10(b).

 

(b)   Duration of Offering
Period.  Each Offering Period
shall be of such duration (not to exceed twenty-seven months) as shall be determined
by the Plan Administrator prior to the beginning of such Offering Period.  Unless the Plan Administrator determines
otherwise, 

 

3

 

before the beginning of the Offering Period, Offering Periods shall
commence at six-month intervals on each January 1 and July 1 (or the
next business day, if such date is not a business day) over the term of the
Plan, and each Offering Period shall last for six months, ending on December 31
or June 30, as the case may be (or the next business day, if such date is
not a business day).  Accordingly, unless
the Plan Administrator determines otherwise, two separate Offering Periods
shall commence in each calendar year during which the Plan remains in
existence.

 

6.                                      ELIGIBILITY

 

(a)   Commencement of
Participation.  Each
individual who is an Eligible Employee on the start date of any Offering Period
under the Plan may enter that Offering Period on such start date.  The Plan Administrator may provide in the
enrollment forms that a Participant who is enrolled on the last day of an
Offering Period will automatically be enrolled in the next following Offering
Period on the same terms and conditions, including the authorized rate of
payroll deductions.

 

(b)   Limitation on
Participation.  Under no
circumstances shall purchase rights be granted under the Plan to any Eligible
Employee if such individual would, immediately after the grant, own (within the
meaning of Code section 424(d)) or hold outstanding options or other rights to
purchase, stock possessing five percent or more of the total combined voting
power or value of all classes of stock of the Company or any Company Affiliate.

 

(c)   Enrollment Forms.  Except as otherwise provided in Section 6(a) above,
in order to participate in the Plan for a particular Offering Period, an
Eligible Employee must complete enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designee) at such time on or before the beginning of that Offering Period as
determined by the Plan Administrator.  An
Eligible Employee who is actively participating in the Plan shall automatically
be enrolled as a Participant for the next Offering Period, unless the Eligible
Employee elects otherwise at least seven days prior to the beginning of the
next Offering Period (or by such other date as the Plan Administrator
determines) by filing the appropriate form with the Plan Administrator (or its
designee).

 

7.                                      PAYROLL DEDUCTIONS

 

(a)   Elections.  The payroll deduction authorized by the
Participant for purposes of acquiring shares of Common Stock during an Offering
Period may be any multiple of one  percent of the
Compensation paid to the Participant during each Offering Period, up to a
maximum of ten  percent  of
Compensation.  The deduction rate so
authorized shall continue in effect throughout the Offering Period, except to
the extent such rate is changed in accordance with the following guidelines:

 

(i)            The
Participant may, at any time during the Offering Period, reduce his or her rate
of payroll deduction, to become effective as soon as 

 

4

 

possible after filing the appropriate form with the Plan Administrator.  The Participant may not effect more than one
such reduction per Offering Period.

 

(ii)           Prior
to the commencement of any new Offering Period, a Participant may increase the
rate of his or her payroll deduction by filing the appropriate form with the
Plan Administrator.  The new rate (which
may not exceed ten percent of Compensation) shall become effective on the start
date of the first Offering Period  following the
filing of such form.

 

(b)   Commencement.  Payroll deductions shall begin on the first pay
day as of which commencement is administratively feasible following the
beginning of the Offering Period and shall (unless sooner terminated by the
Participant) continue through the pay day ending with or immediately prior to
the last day of that Offering Period. 
The amounts so collected shall be credited to a book account established
on the Company’s records for the Participant. 
No interest shall accrue on the balance from time to time outstanding in
such account.  The amounts collected from
the Participant shall not be required to be held in any segregated account or
trust fund and may be commingled with the general assets of the Company and
used for general corporate purposes.

 

(c)   Cessation of Payroll
Deductions.  Payroll
deductions shall automatically cease upon the termination of the Participant’s
purchase right in accordance with the Plan.

 

(d)   Other Forms of
Contributions.  The Plan
Administrator may allow contributions to be made under the Plan in a form other
than payroll deductions, consistent with Code Section 423, in which case
references in the Plan to payroll deductions shall include such other
contributions.

 

8.                                      PURCHASE RIGHTS

 

(a)   Grant of Purchase Rights.  A Participant shall be granted a separate
purchase right for each Offering Period in which he or she is enrolled under
the Plan.  The purchase right shall be
granted on the start date of the Offering Period and shall provide the
Participant with the right to purchase shares of Common Stock upon the terms
set forth below.  The Participant shall
execute a stock purchase agreement embodying such terms and such other
provisions (not inconsistent with the Plan) as the Plan Administrator may deem
advisable.

 

(b)   Exercise of the Purchase
Right.  Each
purchase right shall be automatically exercised on the Purchase Date for the
Offering Period, and shares of Common Stock shall accordingly be purchased on
behalf of each Participant on the Purchase Date.  The purchase shall be effected by applying
the Participant’s payroll deductions for the Offering Period to the purchase of
shares of Common Stock at the purchase price in effect for the Participant for
that Purchase Date.

 

(c)   Purchase Price.  Unless the Plan Administrator determines otherwise prior to
the beginning of the Offering Period, the purchase price per share at which
Common Stock will be purchased on the Participant’s behalf on each Purchase
Date shall be equal to 95% of the Fair 

 

5

 

Market
Value per share of Common Stock on the Purchase Date.  The Plan Administrator may change the
purchase price formula prior to the beginning of an Offering Period, provided
that the purchase price may not be less than the minimum price allowable under
Code section 423.

 

(d)   Number of Purchasable
Shares.  The number of shares
of Common Stock purchasable by a Participant on each Purchase Date shall be the
number of shares obtained by dividing the amount collected from the Participant
through payroll deductions or lump sum contributions by check, as applicable, during
the Offering Period by the purchase price in effect for the Participant for
that Purchase Date.  However, unless the
Plan Administrator determines otherwise before the Offering Period, the maximum
number of shares of Common Stock that may be purchased by a Participant on any Purchase Date for an Offering Period shall
be the number of shares equal to $25,000 divided by the Fair Market Value of
Common Stock on the start date of the Offering Period, subject to adjustment as
described in Section 4(b) and the accrual limitation under Article 9
below. The Plan Administrator shall have the discretionary authority,
exercisable prior to the start of any Offering Period, to increase or decrease
the limitations on the number of shares that may be purchased by a Participant
on each Purchase Date, subject to the accrual limitation under Article 9
below. 

 

(e)   Excess Payroll Deductions.  If at any time the Plan Administrator
determines that only whole shares may be purchased, any payroll deductions that
are not applied to the purchase of shares of Common Stock on any Purchase Date
because they are not sufficient to purchase a whole share of Common Stock shall
be held for the purchase of Common Stock on the next Purchase Date, unless the
Participant requests a refund.  However,
any payroll deductions not applied to the purchase of Common Stock by reason of
the limitations on the maximum number of shares purchasable per Participant
shall be promptly refunded.

 

(f)    Suspension of Payroll
Deductions.  In the event that
a Participant is, by reason of the accrual limitations in Article 9,
precluded from purchasing additional shares of Common Stock on  a Purchase Date, then no further payroll deductions shall
be collected from such Participant with respect to that Purchase Date.  The Participant may
elect to resume participation for an Offering Period scheduled to end in the
following calendar year by making a timely filing of the prescribed enrollment
forms, before the beginning of such Offering Period.

 

(g)   Withdrawal from Offering Period.  The following provisions shall govern the
Participant’s withdrawal from an Offering Period:

 

(i)            A
Participant may withdraw from the Offering Period in which he or she is
enrolled by filing the appropriate form with the Plan Administrator (or its
designee) at least thirty days prior to the Purchase Date (or such other date
as the Plan Administrator determines), and no further payroll deductions shall
be collected from the Participant with respect to that Offering Period.  Any payroll deductions collected during the
Offering Period in which such withdrawal occurs shall, at the Participant’s
election, be promptly refunded or held for the purchase of shares on the
Purchase Date.  If no such election is

 

6

 

made at the time of such withdrawal, then the payroll deductions
collected from the Participant during the Offering Period in which such
withdrawal occurs shall be promptly refunded.

 

(ii)           The
Participant’s withdrawal from an Offering Period shall be irrevocable, and the
Participant may not subsequently rejoin that Offering Period at a later
date.  In order to resume participation
in any subsequent Offering Period, the Participant must re-enroll in the Plan
(by making a timely filing of the prescribed enrollment forms) on or before the
beginning of that Offering Period.

 

(h)   Termination of Purchase
Right.  The following
provisions shall govern the termination of outstanding purchase rights:

 

(i)            If
a Participant ceases to be an Eligible Employee for any reason (including
death, disability or change in status) while his or her purchase right remains
outstanding, the Participant’s purchase right shall immediately terminate, and
all of the Participant’s payroll deductions for the Offering Period in which
the purchase right so terminates shall be promptly refunded to the Participant.

 

(ii)           If a
Participant ceases to remain in active service by reason of an approved unpaid
leave of absence, then the Participant shall have the right to elect to (A) withdraw
all the payroll deductions collected to date on his or her behalf for that
Offering Period or (B) have such funds held for the purchase of shares on
his or her behalf on the Purchase Date, provided, however, if the Participant
does not make such election at least thirty days prior to the Purchase Date,
such funds shall be used for the purchase of shares on his or her behalf on the
Purchase Date.  In no event, however,
shall any further payroll deductions be collected on the Participant’s behalf
during such leave.  Upon the Participant’s
return to active service (x) within three months following the
commencement of such leave or (y) prior to the expiration of any longer
period for which such Participant has a right to reemployment with the Company
provided by statute or contract, his or her payroll deductions under the Plan
shall automatically resume at the rate in effect at the time the leave began if
the return to service is in the same Offering Period (or, if in a different
Offering Period, if Participants are automatically enrolled in the subsequent
Offering Period), unless the Participant withdraws from the Plan prior to his
or her return. An individual who returns to active employment following a leave
of absence that exceeds in duration the applicable (x) or (y) time
period will be treated as a new Eligible Employee for purposes of subsequent
participation in the Plan and may re-enroll in the Plan (by making a timely
filing of the prescribed enrollment forms) for a subsequent Offering Period.

 

(i)    Change in Control.  Unless the Plan Administrator determines
otherwise, immediately prior to the effective date of any change in control of
the Company, as determined by the Plan Administrator, each outstanding purchase
right shall automatically be exercised by 

 

7

 

applying
the payroll deductions of each Participant for the Offering Period in which the
change in control occurs to the purchase of shares of Common Stock at a
purchase price per share equal to 95% of the Fair Market Value per share of
Common Stock immediately prior to the effective date of the change in control
(or such other purchase formula as shall be in effect for the Offering Period,
as determined by the Plan Administrator before the Offering Period).  The applicable limitation on the number of
shares of Common Stock purchasable per Participant shall continue to apply to
any such purchase.  The Company shall use
its best efforts to provide at least ten days’ prior written notice of the
occurrence of any change in control, and Participants shall, following the
receipt of such notice, have the right to terminate their outstanding purchase
rights prior to the effective date of the change in control.

 

(j)    Proration of Purchase
Rights.  If the total number
of shares of Common Stock to be purchased pursuant to outstanding purchase
rights on any particular date exceeds the number of shares then available for
issuance under the Plan, the Plan Administrator shall make a pro-rata
allocation of the available shares on a uniform and nondiscriminatory basis,
and the payroll deductions of each Participant, to the extent in excess of the
aggregate purchase price payable for the Common Stock pro-rated to such
Participant, shall be promptly refunded.

 

(k)   Assignability.  A purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.

 

(l)    Stockholder Rights.  A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant’s behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.

 

(m)  ESPP Brokerage Account.  The shares of
Common Stock purchased on behalf of each Participant shall be deposited
directly into a brokerage account which the Company shall establish for the
Participant at a Company-designated brokerage firm.  The account will be known as the ESPP
Brokerage Account.  The following
policies and procedures shall be in place for any shares deposited into the
Participant’s ESPP Brokerage Account until those shares have been held for the
requisite period necessary to avoid a disqualifying disposition under U.S.
federal tax laws:

 

(i)            Unless
the shares are sold, the shares must be held in the ESPP Brokerage Account
until the later of the following two
periods: (x) the end of the two-year period measured from the start date
of the Offering Period in which the shares were purchased and (y) the end
of the one-year period measured from the actual Purchase Date of those shares.

 

(ii)           Unless
the shares are sold, the deposited shares shall not be transferable (either
electronically or in certificate form) from the ESPP Brokerage Account until the
required holding period for those shares is satisfied.  Such limitation shall apply both to transfers
to different accounts with the same ESPP broker and to transfers to other
brokerage firms.  After the required
holding 

 

8

 

period, the shares may be transferred (either electronically or in
certificate form) to other accounts or to other brokerage firms.

 

(iii)          The foregoing procedures shall not in any way limit
when the Participant may sell his or her shares.  These procedures are designed solely to
assure that any sale of shares prior to the satisfaction of the required
holding period is made through the ESPP Brokerage Account.  In addition, the Participant may request a
stock certificate or share transfer from his or her ESPP Brokerage Account
prior to the satisfaction of the required holding period should the Participant
wish to make a gift of any shares held in that account.  However, shares may not be transferred (either
electronically or in certificate form) from the ESPP Brokerage Account for use
as collateral for a loan, unless those shares have been held for the required
holding period.

 

(iv)          The
foregoing procedures shall apply to all shares purchased by the Participant
under the Plan, whether or not the Participant continues in employee status.

 

9.                                      ACCRUAL LIMITATIONS

 

(a)   Dollar Limitation.  Notwithstanding anything in the Plan to the
contrary, no Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent that such accrual, when aggregated with (i) rights to purchase
Common Stock accrued under any other purchase right granted under this Plan and
(ii) similar rights accrued under other employee stock purchase plans
(within the meaning of Code section 423) of the Company or any Company
Affiliate, would otherwise permit the Participant to purchase more than $25,000
worth of stock of the Company or any Company Affiliate (determined on the basis
of the Fair Market Value per share on the date or dates such rights are
granted) for each calendar year in which such rights are at any time
outstanding.

 

(b)   Application of Dollar
Limitation.  For purposes of
applying such accrual limitations to the purchase rights granted under the
Plan, the following provisions shall apply:

 

(i)            The
right to acquire Common Stock under each outstanding purchase right shall
accrue on each Purchase Date on which such right remains outstanding.

 

(ii)           No
right to acquire Common Stock under any outstanding purchase right shall accrue
to the extent the Participant has already accrued in the same calendar year the
right to acquire Common Stock under one or more other purchase rights at a rate
equal to $25,000 worth of Common Stock (determined on the basis of the Fair
Market Value per share on the date or dates of grant) for each calendar year in
which such rights were at any time outstanding.

 

(iii)          If
a purchase right is outstanding in more than one calendar year, then Common
Stock purchased pursuant to the exercise of such purchase 

 

9

 

right shall be applied first, to the extent allowable under this
Article, against the $25,000 limitation for the earliest year in which the
purchase right was outstanding, then, against the $25,000 limitation for each
succeeding year, in order.

 

(c)   Refund.  If by reason of such accrual limitations, any
purchase right of a Participant does not accrue for a particular Offering
Period, then the payroll deductions that the Participant made during that
Offering Period with respect to such purchase right shall be promptly refunded.

 

(d)   Conflict.  In the event there is any conflict between
the provisions of this Article and one or more provisions of the Plan or
any instrument issued thereunder, the provisions of this Article shall be
controlling.

 

10.                               EFFECTIVE DATE AND TERM OF THE PLAN

 

(a)   Effective Date.  The Plan shall become effective at the
Effective Date, provided that no purchase rights granted under the Plan shall
be exercised, and no shares of Common Stock shall be purchased hereunder, until
(i) the Plan shall have been approved by the stockholders of the Company
and (ii) the Company shall have complied with all applicable requirements
of the 1933 Act (including the registration of the shares of Common Stock
issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange on which the Common Stock is listed for trading and all
other applicable requirements established by law or regulation have been
met.  In the event such stockholder
approval is not obtained, or such compliance is not effected, within twelve
months after the date on which the Plan is adopted by the Board, the Plan shall
terminate and have no further force or effect, and all sums collected from
Participants during the initial Offering Period hereunder shall be promptly
refunded.

 

(b)   Term.  Unless sooner terminated by the Board, the
Plan shall terminate upon the first to occur of (i) the date on which all
shares available for issuance under the Plan shall have been sold pursuant to
purchase rights exercised under the Plan or (ii) the date on which all
purchase rights are exercised in connection with a change in control.  No further purchase rights shall be granted
or exercised, and no further payroll deductions shall be collected, under the
Plan following such termination.

 

11.                               AMENDMENT AND TERMINATION

 

(a)   Amendment; Termination.  The Board may alter, amend, suspend or
terminate the Plan at any time, to become effective immediately following the
close of any Offering Period.  In the
event of Plan termination, any outstanding payroll deductions that are not used
to purchase Common Stock on a Purchase Date pursuant to the Plan shall be
promptly refunded to such Participants.

 

(b)   Stockholder Approval.  In no event may the Board effect any of the
following amendments or revisions to the Plan without the approval of the
Company’s stockholders: (i) 

 

10

 

increase
the number of shares of Common Stock issuable under the Plan, except for
permissible adjustments in the event of certain changes in the Company’s
capitalization, (ii) alter the purchase price formula so as to reduce the
allowable purchase price for the shares of Common Stock purchasable under the
Plan or (iii) modify the eligibility requirements for participation in the
Plan.

 

12.                               GENERAL PROVISIONS

 

(a)   Death.  In the event of the death of a
Participant, the Company shall deliver any shares of Common Stock, cash or both
shares of Common Stock and cash held for the benefit of Participant to the
executor or administrator of the estate of the Participant.

 

(b)   Expenses.  All costs and expenses incurred in the
administration of the Plan shall be paid by the Company; however, each Plan
Participant shall bear all costs and expenses incurred by such individual in
the sale or other disposition of any shares purchased under the Plan.

 

(c)   No Right of Employment.  Nothing in the Plan shall confer upon the
Participant any right to continue in the employ of the Company or any Company
Affiliate or interfere with or otherwise restrict in any way the rights of the
Company (or any Company Affiliate) or of the Participant, which rights are
hereby expressly reserved by each, to terminate such person’s employment at any
time for any reason, with or without cause.

 

(d)   Withholding.  If and to the extent that any stock purchases
or sales under this Plan are subject to federal, state or local taxes, the
Company is authorized to withhold all applicable taxes from shares issuable
under the Plan or from other compensation payable to the Participant.

 

(e)   Transferability.  Neither payroll deductions credited to a
Participant nor any rights with regard to the exercise a purchase right under
the Plan may be assigned, transferred, pledged or otherwise disposed of in any
way (other than by will or the laws of descent and distribution) by the
Participant.  Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds
from an Offering Period in accordance with Section 8(g).

 

(f)    Voting.  The Participant shall have no voting rights
in shares that he or she may purchase pursuant to the Plan until such shares of
Common Stock have actually be purchased by the Participant.

 

(g)   Governing Law.  The validity, construction,
interpretation and effect of the Plan shall be governed and construed by and
determined in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect
to the conflict of laws provisions thereof.

 

11

 

Schedule
A

 

Participating
Employers

 

ANESTA CORP.

ARANA THERAPEUTICS, INC.

CEPHALON, INC.

CIMA LABS INC.

 

A-1EXHIBIT
10.3

 

Summary of Oral
Agreement for Payment of Services

between Cephalon, Inc.

and

its Board of
Directors

dated May 20,
2010

 

Cephalon, Inc. (“Cephalon’) compensates its
non-employee directors through a mix of base cash compensation and stock option
grants, summarized as follows:

 

	
  Cash Compensation:

  	
   

  	
   

  	
   

  
	
  ·  Board Service Annual
  Retainer

  	
   

  	
  $55,000

  	
   

  
	
  ·  Per Meeting Fees

  	
   

  	
   

  	
   

  
	
  ·  Attendance in person

  	
   

  	
  $5,000/mtg.

  	
   

  
	
  ·  Attendance by telephone

  	
   

  	
  $2,000/mtg.

  	
   

  
	
  ·  Committee Service Fees

  	
   

  	
   

  	
   

  
	
  ·  Audit Committee Chair
  Annual Retainer

  	
   

  	
  $30,000

  	
   

  
	
  ·  Stock Option and
  Compensation Committee Chair Annual Retainer

  	
   

  	
  $17,000

  	
   

  
	
  ·  Corporate Governance and
  Nominating Committee Chair Annual Retainer

  	
   

  	
  $17,000

  	
   

  
	
  ·  Committee Member Annual
  Retainer

  	
   

  	
  $15,000

  	
   

  
	
  ·  Presiding Director Annual
  Retainer

  	
   

  	
  $20,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Options:

  	
   

  	
   

  	
   

  
	
  ·  Initial Grant (upon first
  election or appointment to Board)

  	
   

  	
  15,000 shares

  	
   

  
	
  ·  Annual Grant (dated as of
  the date of the Annual Meeting)

  	
   

  	
  15,000 shares

  	
   

  

 

Under the Company’s
2004 Equity Compensation Plan (the “2004 Plan”), the initial grant of 15,000
stock options to a non-employee director is made at the time of the earlier to
occur of such director’s appointment as a director by the Board or first
election to the Board by stockholders. This initial award generally vests over
a four-year period, with 25% becoming exercisable on each anniversary of the
grant date. Upon the date of re-election to the Board at the Annual Meeting, a
non-employee director will receive an annual grant of 15,000 stock options that
are fully exercisable on the date of grant. The Board of Directors also may
grant options to non-employee directors in addition to the automatic grants
described above. Stock options granted to non-employee directors have a
ten-year term and are granted with an exercise price equal to the fair market
value of our common stock on the date of grant.

 

Dr. Baldino
receives no additional remuneration for his service as a director. The Company
also reimburses directors for travel expenses incurred in connection with
attending Board, committee and stockholder meetings and for other Company
business-related expenses. The Company does not provide retirement benefits or
other perquisites to non-employee directors under any current program.

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