Exhibit 10.1


 


CEPHALON,
INC.


2009
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 2009, 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.