CEPHALON INC
EX-10.2
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<p align="right" style="color:windowtext;margin:0pt 0pt 12.0pt;text-align:right;text-indent:288.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 10.2</font></b></p>

<p align="center" style="color:windowtext;margin:0pt 0pt .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CEPHALON, INC.</font></b></p>

<p align="center" style="color:windowtext;margin:0pt 0pt 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">2007 MANAGEMENT INCENTIVE
COMPENSATION PLAN</font></b></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 1. PURPOSE. The
purpose of the Cephalon, Inc. Management Incentive Compensation Plan (the &#147;Plan&#148;)
is to provide Participants (as defined) employed by Cephalon, Inc. (the &#147;Company&#148;)
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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth
below:</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a) &#160;&#147;AWARD&#148; means a cash payment.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160; &#147;BOARD&#148; means the Board of Directors of the
Company.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c) &#160;&#147;COMMITTEE&#148; means the Stock Option and Compensation
Committee of the Board (or any successor committee).</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160; &#147;EXECUTIVE OFFICER&#148; means an executive
officer of the Company as appointed by the Board of Directors or other key
employee.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e) &#160;&#147;MEASUREMENT PERIOD&#148; means a period of time
selected by the Committee for which performance will be measured for purposes
of Section 4.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)&#160; &#147;MAXIMUM AWARD&#148; 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&#146;s annual base salary.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g) &#160;&#147;PARTICIPANT&#148; means any Executive Officer selected
by the Committee to participate in the Plan.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(h) &#160;&#147;PERFORMANCE PERIOD&#148; means a period of time
selected by the Committee to which an Award relates.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i) &#160;&#147;TARGET AWARD&#148; means an Award level that may
be paid if certain performance criteria are achieved.</font></p>

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<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(j) &#160;&#147;THRESHOLD PERFORMANCE&#148; means a level of
achievement of 85% of target performance for the Chairman/Chief Executive
Officer and 90% of target performance for other Participants.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 4.
AWARDS-GENERAL.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a) <u>Target
Awards</u>.&#160; 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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b) <u>Performance
Criteria; Award Levels</u>.&#160; 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&#146;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.&#160; Performance
criteria for Participants (other than Chairman/Chief Executive Officer) will be
established by management.&#160; For the
Performance Period fiscal year 2007, 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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c) <u>Awards</u>.&#160; 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&#146;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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 5. OTHER
CONDITIONS.</font></p>

<p style="color:windowtext;margin:0pt 0pt .0001pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(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.</font></p>

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<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">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&#146;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&#146;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&#146;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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 7. PLAN
ADMINISTRATION.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(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.</font></p>

<p style="color:windowtext;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b) The Plan shall
be governed by the laws of the State of Delaware and applicable Federal law.</font></p>

<p style="color:windowtext;margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">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.</font></p>

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