CEPHALON INC
MATERIAL CONTRACTS
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<DESCRIPTION>MATERIAL CONTRACTS
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<p align="right" style="color:windowtext;margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">EXHIBIT&nbsp;10.1</font></b></p>

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<p align="center" style="color:windowtext;margin:0in 0in .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:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">2006
MANAGEMENT INCENTIVE COMPENSATION PLAN</font></b></p>

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<p style="color:windowtext;font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION&nbsp;1.</font>  PURPOSE. The purpose of the Cephalon,&nbsp;Inc. Management
Incentive Compensation Plan (the &#147;Plan&#148;) is to provide Participants (as
defined) employed by Cephalon,&nbsp;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.</p>

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<p style="color:windowtext;font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION&nbsp;2.</font>  DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:</p>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a) &#147;AWARD&#148; means a cash payment.</font></p>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b) &#147;BOARD&#148; means the Board of Directors of
the Company.</font></p>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c) &#147;COMMITTEE&#148; means the Stock Option and Compensation
Committee of the Board (or any successor committee).</font></p>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d) &#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:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e) &#147;MEASUREMENT PERIOD&#148; means a period of
time selected by the Committee for which performance will be measured for
purposes of Section&nbsp;4.</font></p>

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

<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f) &#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:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g) &#147;PARTICIPANT&#148;
means any Executive Officer selected by the Committee to participate in the
Plan.</font></p>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(h) &#147;PERFORMANCE
PERIOD&#148; means a period of time selected by the Committee to which an Award
relates.</font></p>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i) &#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:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(j) &#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>

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<p style="color:windowtext;font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION&nbsp;3.</font>  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.</p>

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<p style="color:windowtext;font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION&nbsp;4.</font>  AWARDS-GENERAL.</p>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&nbsp;<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>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&nbsp;<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 2006, 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:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&nbsp;<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&nbsp;2
may be increased or decreased by the Committee, provided, however, than any
Award may not exceed the applicable Maximum Award amount.</font></p>

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<p style="color:windowtext;font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION&nbsp;5.</font>  OTHER CONDITIONS.</p>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&nbsp;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:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&nbsp;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>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&nbsp;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>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&nbsp;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>

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<p style="color:windowtext;font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION&nbsp;6.</font>  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.</p>

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<p style="color:windowtext;font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION&nbsp;7.</font>
PLAN ADMINISTRATION.</p>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&nbsp;The Committee shall have full
discretionary power to administer and interpret the Plan and to establish rules&nbsp;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>

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<p style="color:windowtext;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&nbsp;The Plan shall be governed by the
laws of the State of Delaware and applicable Federal law.</font></p>

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<p style="color:windowtext;font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION&nbsp;8.</font>  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.</p>

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