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) February 1, 2011
Cephalon, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware | | 0-19119 | | 23-2484489 |
(State or Other Jurisdiction | | (Commission | | (IRS Employer |
of Incorporation) | | File Number) | | 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 1.01 Entry into a Material Definitive Agreement
On February 1, 2011, the independent members of the Board of Directors (the “Board”) of Cephalon, Inc. (the “Company” or “Cephalon”), upon the recommendation of the Stock Option and Compensation Committee (the “Compensation Committee”), adopted the 2011 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 2011 outlined in the MICP (the “Performance Goals”) for each executive officer.
The Performance Goals for 2011 consist of both financial and operational goals. Financial goals are based on weighted targets for total product sales and pro forma net income in 2011. Operational goals are focused on four areas: clinical, business development, compliance, and research and development. Within these areas, the operational goals include, among other things, progressing or completing specified clinical trials in the U.S. and Europe, executing the Company’s business development strategy and global compliance programs, and advancing the Company’s research and development plan by continuing pre-clinical development of specified compounds. The following table summarizes the components of the MICP for 2011.
| | Chief Executive Officer | | Other Executive Officers |
| | | | |
Financial Goals | | · Total product sales target (20%) | | · Total product sales target (15%) |
| | · Pro forma net income target (25%) | | · Pro forma net income target (15%) |
| | | | |
Operational Goals | | Performance goals in the areas of clinical (20%), business development (15%), compliance (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 is 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 is required for an executive officer to be eligible for an MICP award · For each MICP point above or below 100, target bonus percentage of 50% is increased or decreased by 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 2011 base salary | | 50% of 2011 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 executive officer’s base salary (at maximum performance) |
2
| | Chief Executive Officer | | Other Executive Officers |
| | | | |
MICP Award Dollar Value | | Could range from $0 (for an MICP score below 85) to $2,700,000 (for maximum performance). | | Individual awards could range from $0 (for an MICP score below 90) to approximately $700,000 (for maximum performance). |
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 2011 is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. | | Description of Exhibit |
| | |
10.1 | | Cephalon, Inc. 2011 Management Incentive Compensation Plan |
3
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 4, 2011 | By: | /s/ Gerald J. Pappert |
| | Gerald J. Pappert |
| | Executive Vice President & General Counsel |
4
EXHIBIT INDEX
Exhibit No. | | Description of Document |
| | |
10.1 | | Cephalon, Inc. 2011 Management Incentive Compensation Plan |
5
