8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported) January 31, 2008

Cephalon, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware	0-19119	23-2484489
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
41 Moores Rd. Frazer, Pennsylvania		19355
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (610) 344-0200

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01Entry into a Material Definitive Agreement

On January 31, 2008, the independent members of the Board of Directors (the “Board”) of Cephalon, Inc. (the “Company”), upon the recommendation of the Stock Option and Compensation Committee (the “Compensation Committee”), adopted the 2008 Management Incentive Compensation Program (the “MICP”) for the Company’s executive officers appointed by the Board and key employees.  Under the MICP, the Company’s executive officers shall be entitled to earn cash bonus compensation (an “Award”) based upon the achievement of certain pre-established performance goals for 2008 outlined in the MICP (the “Performance Goals”) for each executive officer.

The Performance Goals for 2008 consist of both financial and operational goals.  Financial goals are based on equally weighted targets for total product sales and pro forma net income in 2008.  Operational goals are focused on three areas: clinical, manufacturing and technical operations, and research and development.  Within these areas, the operational goals include, among other things, securing regulatory approval of specified product candidates, progressing or completing specified clinical trials in the U.S. and Europe, providing timely and cost-effective manufacturing support for new and existing products and products in clinical development, and advancing the Company’s research and development plan by continuing pre-clinical development of specified compounds including, as warranted, filing investigational new drug applications.  The following table summarizes the components of the MICP for 2008.

	Chief Executive Officer	Other Executive Officers
Financial Goals	·Total product sales target (30%)	·Total product sales target (15%)
	·Pro forma net income target (30%)	·Pro forma net income target (15%)
Operational Goals	Performance goals in the areas of clinical (20%), manufacturing and technical operations (10%) and R&D (10%)	Objectives are specific to each individual executive officer and his or her areas of responsibility (70%)
MICP “Score”	·Weighted average minimum MICP score of 85 of the above listed components required for CEO to be eligible for an MICP award ·For each MICP point below 100, target bonus percentage of 100% is decreased by approximately 7% (e.g., MICP score of 98 yields a bonus payout of 87% of base salary) ·For each MICP point above 100, target bonus percentage is increased by an average of approximately 14% for MICP scores from 101 to 111. For example, an MICP score of 102 yields a bonus payout of 128% of base salary. At an MICP score of 112, the maximum bonus will be earned.	·Weighted average minimum MICP score of 90 of the above listed components required for an executive officer to be eligible for an MICP award ·For each MICP point above or below 100, target bonus percentage of 100% is increased or decreased by an average of 3.5%, respectively (e.g., MICP score of 98 yields a bonus payout of 43% of base salary). At an MICP score of 120, the maximum bonus will be earned.
Target MICP Bonus	100% of 2008 base salary	50% of 2008 base salary
MICP Award Percentage	Could range from 0% (for an MICP score below 85) to 300% of base salary (at maximum performance)	Could range from 0% (for an MICP score below 90) to 110% of an NEO’s base salary (at maximum performance)
MICP Award Dollar Value	Could range from $0 (for an MICP score below 85) to $ $3,733,800 (for maximum performance).	Individual awards could range from $0 (for an MICP score below 90) to approximately $624,400 (for maximum performance).

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At the end of each fiscal year, the Compensation Committee is responsible for assessing the performance of each executive officer against the established Performance Goals and determining the level of awards, if any, under the MICP.  The Compensation Committee then presents its decisions to the independent members of the Board for ratification.

The MICP for 2008 is attached hereto as Exhibit 10.1 and incorporated herein by reference.

Item 5.02Departure of Directors or Principal Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

With respect to the MICP for 2008, the information required by this Item 5.02 is incorporated by reference to the information contained in Item 1.01 above.

Item 9.01Financial Statements and Exhibits

(d)Exhibits.

Exhibit No.	Description of Document
10.1	Cephalon, Inc. 2008 Management Incentive Compensation Plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CEPHALON, INC.
Date: February 1, 2008	By:	/s/ J. Kevin Buchi
		J. Kevin Buchi
		Executive Vice President & Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description of Document
10.1	Cephalon, Inc. 2008 Management Incentive Compensation Plan

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EX-10.1

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.