Exhibit
10.1


 


CEPHALON,
INC.


2008
MANAGEMENT INCENTIVE COMPENSATION PLAN


 


SECTION 1. PURPOSE. The purpose of the
Cephalon, Inc. Management Incentive Compensation Plan (the “Plan”) is to
provide Participants (as defined) employed by Cephalon, Inc. (the “Company”)
and its affiliates with incentive compensation based upon the level of
achievement of financial and other performance criteria. The Plan will enhance
the ability of the Company and its affiliates to attract and retain individuals
of exceptional managerial talent upon whom, in large measure, the sustained
progress, growth and profitability of the Company depends.


 


SECTION 2. DEFINITIONS. As used in the
Plan, the following terms shall have the meanings set forth below:


 


(a) “AWARD” means a
cash payment.


 


(b)  “BOARD” means the
Board of Directors of the Company.


 


(c) “COMMITTEE” means
the Stock Option and Compensation Committee of the Board (or any successor
committee).


 


(d)  “EXECUTIVE OFFICER”
means an executive officer of the Company as appointed by the Board of
Directors or other key employee.


 


(e) “MEASUREMENT PERIOD”
means a period of time selected by the Committee for which performance will be
measured for purposes of Section 4.


 


(f)  “MAXIMUM AWARD”
means the limitation on awards payable under this Plan in any year, which for
the Chairman/Chief Executive Officer is 300% of his annual base salary and for
any other Participant is 110% of the Participant’s annual base salary.


 


(g) “PARTICIPANT” means
any Executive Officer selected by the Committee to participate in the Plan.


 


(h) “PERFORMANCE PERIOD”
means a period of time selected by the Committee to which an Award relates.


 


(i) “TARGET AWARD”
means an Award level that may be paid if certain performance criteria are
achieved.


 


(j)  “THRESHOLD
PERFORMANCE” means a level of performance that supports a minimum payout; the
threshold performance level is established each year reflecting 


 

















 


business dynamics of the Company and the
industry and historical performance levels of the Company and industry.


 


SECTION 3. ELIGIBILITY. Persons employed
by the Company or any of its affiliates during a Performance Period in active
service in a managerial or professional role for all or any part of the
Performance Period are eligible to be Participants under the Plan for such
Performance Period (whether or not so employed or living at the date an Award
is made) and may be considered by the Committee for an Award. An employee is
not rendered ineligible to be a Participant by reason of being a member of the
Board.


 


SECTION 4.
AWARDS-GENERAL.


 


(a) Target Awards.  The Committee will establish the Target
Awards for Participants at the beginning of each Performance Period. For the
Chairman/Chief Executive Officer, the Target Award shall be 100% of annual base
salary; for Participants other than the Chairman/Chief Executive Officer, the
Target Award shall be 50% of annual base salary.


 


(b) Performance
Criteria; Award Levels.  The
performance criteria utilized by the Committee for the Chairman/Chief Executive
Officer may be based on individual performance, revenue, earnings per share,
other Company and business unit financial objectives, operational efficiency
measures, and other measurable objectives tied to the Company’s success or such
other criteria as the Committee shall determine in its discretion. The
Committee shall each year also determine specific levels of achievement of the
established performance criteria that correspond to Threshold Performance,
Target Award and Maximum Award.  Performance
criteria for Participants (other than Chairman/Chief Executive Officer) will be
established by management.  For the
Performance Period fiscal year 2008, the performance criteria for the
Chairman/Chief Executive Officer and the other Participants, and the
relationship between achievement of such performance criteria and respective
Award levels, are set out in the Schedules 1 and 2, respectively, to the Plan.


 


(c) Awards.  Awards will be made by the Committee
following the end of each Performance Period. Awards shall be paid after the end
of the Performance Period, except to the extent that a Participant has made an
election to defer the receipt of such Award pursuant to the Company’s deferred
compensation plan. The Award amount determined in accordance with Schedule 2
may be increased or decreased by the Committee, provided, however, than any
Award may not exceed the applicable Maximum Award amount.


 


SECTION 5.
OTHER CONDITIONS.


 


(a) No person shall
have any claim to an Award under the Plan and there is no obligation for
uniformity of treatment of Participants under the Plan. Awards under the Plan
may not be assigned or alienated.


 


(b) Neither the Plan
nor any action taken hereunder shall be construed as giving to any Participant
the right to be retained in the employ of the Company or any affiliate.


 

















 


(c) The Company or any
affiliate shall have the right to deduct from any Award to be paid under the
Plan any federal, state or local taxes required by law to be withheld with
respect to such payment.


 


(d) Awards under the
Plan will not be included in base compensation or covered compensation under
the retirement programs of the company for purposes of determining pensions,
retirement and death related benefits.


 


SECTION 6.
DESIGNATION OF BENEFICIARIES. A Participant may, if the Committee permits,
designate a beneficiary or beneficiaries to receive all or part of the Award
which may be made to the Participant, or may be payable, after such Participant’s
death. A designation of beneficiary shall be made in accordance with procedures
specified by the Company and may be replaced by a new designation or may be
revoked by the Participant at any time. In case of the Participant’s death, an
Award with respect to which a designation of beneficiary has been made (to the
extent it is valid and enforceable under applicable law) shall be paid to the
designated beneficiary or beneficiaries. Any Award granted or payable to a
Participant who is deceased and not subject to such a designation shall be
distributed to the Participant’s estate. If there shall be any question as to
the legal right of any beneficiary to receive an Award under the Plan, the
amount in question may be paid to the estate of the Participant, in which event
the Company or its affiliates shall have no further liability to anyone with
respect to such amount.


 


SECTION 7.
PLAN ADMINISTRATION.


 


(a) The Committee shall
have full discretionary power to administer and interpret the Plan and to
establish rules for its administration (including the power to delegate
authority to others to act for and on behalf of the Committee) subject to such
resolutions, not inconsistent with the Plan, as may be adopted by the Board. In
making any determinations under or referred to in the Plan, the Committee (and
its delegates, if any) shall be entitled to rely on opinions, reports, analysis
or statements of employees of the Company and its affiliates and of counsel,
public accountants and other professional or expert persons.


 


(b) The Plan shall be
governed by the laws of the State of Delaware and applicable Federal law.


 


SECTION 8.
MODIFICATION OR TERMINATION OF PLAN. The Board may modify or terminate the Plan
at any time, effective at such date as the Board may determine.