<PAGE>
                                                                    Exhibit 10.2

                           KING PHARMACEUTICALS, INC.

                                 INCENTIVE PLAN

                               OPTION CERTIFICATE

     This Certificate, when executed by a duly authorized officer of King
Pharmaceuticals, Inc. (the "Company") and by the Participant, evidences the
grant to the Participant named below of an Option to purchase shares of the
Common Stock of the Company.

1.   Name and Address of Participant:         __________________________________

                                              __________________________________

                                              __________________________________

2.   Date of Grant:                           __________________________________

3.   Type of Grant:                           Nonstatutory Stock Option

4.   Maximum Number of Shares for
     which this Option is exercisable:        __________________________________

5.   Exercise (purchase) price per share:     __________________________________

6.   Vesting Schedule: This Option shall become exercisable (and the Shares
     issued upon exercise shall be vested) as follows:

     On or after the first anniversary of ___________, up to 33% of the Shares

     On or after the second anniversary of ___________, an additional 33% of the
     Shares

     On or after the third anniversary of ___________, an additional 34% of the
     Shares

     The number of shares included in the first two tranches shall be rounded
     down to the nearest whole number, while the number of shares included in
     the third and final tranche shall be the remaining unvested balance of the
     Shares.

This Option is subject to and governed by the terms of this Option Certificate,
the Option Agreement attached hereto and incorporated by reference herein and
the Company's Incentive Plan.

This Option Certificate may be executed in more than one counterpart, each of
which shall be deemed an original, but all of which together shall constitute
but one and the same instrument. Facsimile or photographic copies of originally
signed copies of this Option Certificate will be deemed to be originals.


                                        KING PHARMACEUTICALS, INC.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        PARTICIPANT

                                        ----------------------------------------

FORM SO-1

<PAGE>

                           KING PHARMACEUTICALS, INC.

                       NONSTATUTORY STOCK OPTION AGREEMENT

     AGREEMENT made as of the Date of Grant set forth on the Option Certificate
attached hereto, between King Pharmaceuticals, Inc. (the "Company"), a Tennessee
corporation having a principal place of business at 501 Fifth Street, Bristol,
Tennessee 37620, and the individual identified on the Option Certificate (the
"Participant").

     WHEREAS, the Company desires to grant to the Participant an Option to
purchase shares of its common stock, no par value per share (the "Shares"),
under and for the purposes set forth in the Company's Incentive Plan (the
"Plan") with the specific terms of such Option grant as set forth on the Option
Certificate attached hereto;

     WHEREAS, the Company and the Participant understand and agree that any
terms used and not defined herein have the same meanings as in the Plan; and

     WHEREAS, the Company and the Participant each intend that the Option
granted herein shall be a Nonstatutory Stock Option.

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:

     1.   GRANT OF OPTION.

     The Company hereby grants to the Participant the right and option to
purchase all or any part of an aggregate of the number of Shares listed on the
Option Certificate attached hereto, subject to adjustment upon an Adjustment
Event after the date hereof as provided in the Plan, on the terms and conditions
and subject to all the limitations set forth herein, under United States
securities and tax laws, and in the Plan, which is incorporated herein by
reference. The Participant acknowledges receipt of a copy of the Plan.

     2.   PURCHASE PRICE.

     The purchase price of the Shares covered by the Option shall be the price
per Share as set forth on the Option Certificate attached hereto, subject to
adjustment upon an Adjustment Event after the date hereof as provided in the
Plan (the "Purchase Price"). Payment shall be made in accordance with Section
6.4 of the Plan.

     3.   EXERCISABILITY OF OPTION.

     Subject to the terms and conditions set forth in this Agreement and the
Plan, the Option granted hereby shall become exercisable as set forth on the
Option Certificate attached hereto which rights are cumulative and are subject
to the other terms and conditions of this Agreement and the Plan.


                                       2

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     4.   TERM OF OPTION.

     The Option shall terminate ten years from the Date of Grant set forth on
the Option Certificate attached to this Agreement, but shall be subject to
earlier termination as provided herein or in the Plan.

     If the Participant ceases to be an employee of the Company or of a
Subsidiary (for any reason other than the death, Disability or Approved
Retirement of the Participant or termination of the Participant for Cause (as
defined in the Plan)), the Option may be exercised, if it has not previously
terminated, at any time within three months of the date the Participant ceases
to be an employee of the Company or a Subsidiary, or within the originally
prescribed term of the Option, whichever is earlier, but may not be exercised
thereafter. In such event, the Option shall be exercisable only to the extent
that the Option has become exercisable and is in effect at the date of such
cessation of employment.

     Notwithstanding the foregoing, in the event of the Participant's Disability
or death within three months after the termination of employment, the
Participant or the Participant's Survivors may exercise the Option within one
year after the date of the Participant's termination of employment, but in no
event after the date of expiration of the term of the Option.

     In the event the Participant's employment is terminated by the Company or a
Subsidiary for Cause, the Participant's right to exercise any unexercised
portion of this Option shall cease immediately as of the time the Participant is
notified his or her employment is terminated for Cause, and this Option shall
thereupon terminate. Notwithstanding anything herein to the contrary, if
subsequent to the Participant's termination, but prior to the exercise of the
Option or any portion thereof, the Committee determines that, either prior or
subsequent to the Participant's termination, the Participant engaged in conduct
which would constitute Cause, then the Participant shall immediately cease to
have any right to exercise all or any portion of the Option and this Option
shall thereupon terminate.

     In the event of the Disability of the Participant, as determined in
accordance with the Plan, the Option shall become immediately vested in full and
may be exercised within one year after the Participant's termination of
employment or, if earlier, within the term originally prescribed by the Option.

     In the event of the death of the Participant while an employee of the
Company or of a Subsidiary, the Option shall become immediately vested in full
and may be exercised by the Participant's Survivors within two years after the
date of death of the Participant or, if earlier, within the originally
prescribed term of the Option.

     In the event a Participant's employment terminates by reason of Approved
Retirement in accordance with the Plan, the Participant may exercise the Option
at any time within the originally prescribed term of the Option. In such event,
the Option shall be exercisable only to the extent that the Option has become
exercisable and is in effect at the date of such cessation of employment.


                                       3

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     5.   METHOD OF EXERCISING OPTION.

     Subject to the terms and conditions of this Agreement, the Option may be
exercised by written notice to the Company or its designee, in substantially the
form of Exhibit A attached hereto. Such notice shall state the number of Shares
with respect to which the Option is being exercised and shall be signed by the
person exercising the Option. Payment of the purchase price for such Shares
shall be made in accordance with Section 6.4 of the Plan. The Company shall
deliver such Shares as soon as practicable after the notice shall be received,
provided, however, that the Company may delay issuance of such Shares until
completion of any action or obtaining of any consent, which the Company deems
necessary under any applicable law (including, without limitation, state
securities or "blue sky" laws). The Shares as to which the Option shall have
been so exercised shall be registered in the Company's share register in the
name of the person so exercising the Option (or, if the Option shall be
exercised by the Participant and if the Participant shall so request in the
notice exercising the Option, shall be registered in the Company's share
register in the name of the Participant and another person jointly, with right
of survivorship) and shall be delivered as provided above to or upon the written
order of the person exercising the Option. In the event the Option shall be
exercised, pursuant to Section 4 hereof, by any person other than the
Participant, such notice shall be accompanied by appropriate proof of the right
of such person to exercise the Option. All Shares that shall be purchased upon
the exercise of the Option as provided herein shall be fully paid and
nonassessable.

     6.   PARTIAL EXERCISE.

     Exercise of this Option to the extent above stated may be made in part at
any time and from time to time within the above limits, except that no
fractional share shall be issued pursuant to this Option.

     7.   NON-ASSIGNABILITY.

     The Option shall not be transferable by the Participant otherwise than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act or the rules thereunder. However, the
Participant, with the approval of the Committee, may transfer the Option for no
consideration to or for the benefit of a Family Member, subject to such limits
as the Committee may establish, and the transferee shall remain subject to all
the terms and conditions applicable to the Option prior to such transfer and
each such transferee shall so acknowledge in writing as a condition precedent to
the effectiveness of such transfer. Except as provided in the previous sentence,
the Option shall be exercisable, during the Participant's lifetime, only by the
Participant (or, in the event of legal incapacity or incompetency, by the
Participant's guardian or representative) and shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. Any attempted transfer,
assignment, pledge, hypothecation or other disposition of the Option or of any
rights granted hereunder contrary to the provisions of this Section 7, or the
levy of any attachment or similar process upon the Option shall be null and
void.


                                       4

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     8.   NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.

     The Participant shall have no rights as a stockholder with respect to
Shares subject to this Agreement until registration of the Shares in the
Company's share register in the name of the Participant. Except as is expressly
provided in the Plan with respect to certain changes in the capitalization of
the Company, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date of such registration.

     9.   CHANGE OF CONTROL.

     Section 11 of the Plan contains provisions covering the vesting of and
treatment of Options upon a Change of Control and is incorporated herein by
reference.

     10.  TAXES.

     The Participant acknowledges that upon exercise of the Option the
Participant will be deemed to have taxable income measured by the difference
between the then fair market value of the Shares received upon exercise and the
price paid for such Shares pursuant to this Agreement. The Participant
acknowledges that any income or other taxes due from him or her with respect to
this Option or the Shares issuable pursuant to this Option shall be the
Participant's responsibility.

     The Participant agrees that the Company may withhold from the Participant's
remuneration, if any, the minimum statutory amount of federal, state and local
withholding taxes attributable to such amount that is considered compensation
includable in such person's gross income. At the Company's discretion, the
amount required to be withheld may be withheld in cash from such remuneration,
or in kind from the Shares otherwise deliverable to the Participant on exercise
of the Option. The Participant further agrees that, if the Company does not
withhold an amount from the Participant's remuneration sufficient to satisfy the
Company's income tax withholding obligation, the Participant will reimburse the
Company on demand, in cash, for the amount under-withheld.

     11.  PURCHASE FOR INVESTMENT.

     Unless the offering and sale of the Shares to be issued upon the particular
exercise of the Option shall have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended (the "1933 Act"),
the Company shall be under no obligation to issue the Shares covered by such
exercise unless and until the following conditions have been fulfilled:

     (a)  The person(s) who exercise the Option shall warrant to the Company, at
          the time of such exercise, that such person(s) are acquiring such
          Shares for their own respective accounts, for investment, and not with
          a view to, or for sale in connection with, the distribution of any
          such Shares, in which event the person(s) acquiring such Shares shall
          be bound by the provisions of the following legend which shall be
          endorsed upon the certificate(s) evidencing the Shares issued pursuant
          to such exercise:


                                       5

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               "The shares represented by this certificate have been taken for
               investment and they may not be sold or otherwise transferred by
               any person, including a pledgee, unless (1) either (a) a
               Registration Statement with respect to such shares shall be
               effective under the Securities Act of 1933, as amended, or (b)
               the Company shall have received an opinion of counsel
               satisfactory to it that an exemption from registration under such
               Act is then available, and (2) there shall have been compliance
               with all applicable state securities laws;" and

     (b)  If the Company so requires, the Company shall have received an opinion
          of its counsel that the Shares may be issued upon such particular
          exercise in compliance with the 1933 Act without registration
          thereunder. Without limiting the generality of the foregoing, the
          Company may delay issuance of the Shares until completion of any
          action or obtaining of any consent, which the Company deems necessary
          under any applicable law (including without limitation state
          securities or "blue sky" laws).

     12.  RESTRICTIONS ON TRANSFER OF SHARES.

     The Participant acknowledges and agrees that neither the Company, its
shareholders nor its directors and officers, has any duty or obligation to
disclose to the Participant any material information regarding the business of
the Company or affecting the value of the Shares before, at the time of, or
following a termination of the employment of the Participant by the Company,
including, without limitation, any information concerning plans for the Company
to make a public offering of its securities or to be acquired by or merged with
or into another firm or entity.

     13.  NO OBLIGATION TO MAINTAIN RELATIONSHIP.

     The Company is not by the Plan or this Option obligated to continue the
Participant as an employee of the Company or a Subsidiary. The Participant
acknowledges: (i) that the Plan is discretionary in nature and may be suspended
or terminated by the Company at any time; (ii) that the grant of the Option is a
one-time benefit which does not create any contractual or other right to receive
future grants of options, or benefits in lieu of options; (iii) that all
determinations with respect to any such future grants, including, but not
limited to, the times when options shall be granted, the number of shares
subject to each option, the option price, and the time or times when each option
shall be exercisable, will be at the sole discretion of the Company; (iv) that
the Participant's participation in the Plan is voluntary; (v) that the value of
the Option is an extraordinary item of compensation which is outside the scope
of the Participant's employment contract, if any; and (vi) that the Option is
not part of normal or expected compensation for purposes of calculating any
severance, resignation, redundancy, end of service payments, bonuses,
long-service awards, pension or retirement benefits or similar payments.

     14.  NOTICES.

     Any notices required or permitted by the terms of this Agreement or the
Plan shall be given by recognized courier service, facsimile, registered or
certified mail, return receipt requested, addressed as follows:


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If to the Company:     at its principal business office listed on the first page
                       of this Agreement

If to the Participant: at the address set forth on the Option Certificate
                       attached hereto

or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given upon
the earlier of receipt, one business day following delivery to a recognized
courier service or three business days following mailing by registered or
certified mail.

     15.  GOVERNING LAW.

     This Agreement shall be construed and enforced in accordance with the law
of the State of Tennessee, without giving effect to the conflict of law
principles thereof. For the purpose of litigating any dispute that arises under
this Agreement, the parties hereby consent to exclusive jurisdiction in the
State of Tennessee and agree that such litigation shall be conducted in the
state courts of Tennessee or the federal courts of the United States for the
District of Tennessee.

     16.  BENEFIT OF AGREEMENT.

     Subject to the provisions of the Plan and the other provisions hereof, this
Agreement shall be for the benefit of and shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.

     17.  ENTIRE AGREEMENT.

     This Agreement, together with the Option Certificate and the Plan, embodies
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement not expressly set forth in this
Agreement shall affect or be used to interpret, change or restrict, the express
terms and provisions of this Agreement, provided, however, in any event, this
Agreement shall be subject to and governed by the Plan.

     18.  MODIFICATIONS AND AMENDMENTS.

     The terms and provisions of this Agreement may be modified or amended as
provided in the Plan.


                                       7

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     19.  WAIVERS AND CONSENTS.

     Except as provided in the Plan, the terms and provisions of this Agreement
may be waived, or consent for the departure therefrom granted, only by written
document executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.

     20.  DATA PRIVACY.

     By entering into this Agreement, the Participant: (i) authorizes the
Company and each Subsidiary, and any agent of the Company or any Subsidiary
administering the Plan or providing Plan recordkeeping services, to disclose to
the Company or any of its Subsidiaries such information and data as the Company
or any such Subsidiary shall request in order to facilitate the grant of options
and the administration of the Plan; (ii) waives any data privacy rights he or
she may have with respect to such information; and (iii) authorizes the Company
and each Subsidiary to store and transmit such information in electronic form.


                                        8

<PAGE>

                                    EXHIBIT A
                  TO NONSTATUTORY STOCK OPTION GRANT AGREEMENT
                                 PURSUANT TO THE
                    KING PHARMACEUTICALS, INC. INCENTIVE PLAN

                 NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION

TO: King Pharmaceuticals, Inc.

Ladies and Gentlemen:

     I hereby exercise my Nostatutory Stock Option to purchase _________ shares
(the "Shares") of the common stock, no par value, of King Pharmaceuticals, Inc.
(the "Company"), at the exercise price of $________ per share, pursuant to and
subject to the terms of that certain Nonstatutory Stock Option Agreement between
the undersigned and the Company dated _______________, 200_.

     I understand the nature of the investment I am making and the financial
risks thereof. I am aware that it is my responsibility to have consulted with
competent tax and legal advisors about the relevant national, state and local
income tax and securities laws affecting the exercise of the Option and the
purchase and subsequent sale of the Shares.

     I am paying the option exercise price for the Shares as follows:

               ____________________________________

     Please issue the Shares (check one):

     [ ]  to me; or

     [ ]  to me and ____________________________, as joint tenants with right of
          survivorship,

     at the following address:
     __________________________________________
     __________________________________________
     __________________________________________


                                       A-1

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     My mailing address for shareholder communications, if different from the
address listed above, is:

     ------------------------------------------

     ------------------------------------------

     ------------------------------------------

                                        Very truly yours,


                                        ----------------------------------------
                                        Participant (signature)

                                        ----------------------------------------
                                        Print Name

                                        ----------------------------------------
                                        Date

                                        ----------------------------------------
                                        Social Security Number


                                       A-2