Document:

exv10w1

 

Exhibit 10.1

Performance Unit

One-Year Vest

REYNOLDS AMERICAN INC.

LONG-TERM INCENTIVE PLAN

 

PERFORMANCE UNIT AGREEMENT

 

DATE OF GRANT: February 9, 2006

W I T N E S S E T H:

     1. Grant. Pursuant to the provisions of the Long-Term Incentive Plan
(collectively, the “Plan”), Reynolds American Inc. (the “Company”) on the above date has granted to

«FirstName» «LastName» (the “Grantee”),

subject to the terms and conditions which follow and the terms and conditions of the Plan, a target
of

«Number» Performance Units.

A copy of the Plan is attached and made a part of this Agreement with the same effect as if set
forth in the Agreement itself. All capitalized terms used in this Agreement shall have the meaning
set forth in the Plan, unless otherwise indicated.

     2. Valuation of Performance Units. Each Performance Unit shall have an
initial value of $1,000 (the “Initial Grant Value”). The Compensation Committee of the Company’s Board of
Directors (the “Compensation Committee”) shall value each Performance Unit at the end of 2006 using
the performance measures set forth in the grid attached as Exhibit A, but the Compensation
Committee shall have the discretion to reduce the resulting valuation (the “Payment Value”). The
Grantee agrees that the Performance Units granted hereunder are in lieu of an award under the
Company’s Annual Incentive Award Plan for 2006.

     3. Vesting. (a) The Performance Units shall fully vest on December 31,
2006.

     (b) Notwithstanding anything in Section 3(a) to the contrary, in the event of (i) the
Grantee’s death, (ii) the Grantee’s Permanent Disability (as defined in the Company’s Long Term
Disability Plan), (iii) the Grantee’s Retirement (as defined below) or (iv) the Grantee’s
involuntary Termination of Employment without Cause (as such terms are defined in Section 5 of this
Agreement), the number of Performance Units which shall vest shall be equal to the product of (i)
the original number of Performance Units granted to the Grantee under this Agreement and (ii) a
fraction, the numerator of which shall be the number of whole or partial months between January 1,
2006, and the date of the Grantee’s Termination of Employment,

 

 

and the denominator of which shall be 12. For purposes of this Agreement, the term
“Retirement” shall mean the Grantee’s voluntary Termination of Employment (as such term is defined
in Section 5 of this Agreement) on or after his or her 65th birthday, or on or after his
or her 55th birthday with 10 or more years of service with the Company or a subsidiary
of the Company.

     (c) Upon the Grantee’s voluntary Termination of Employment or Termination of Employment for
Cause (as such terms are defined in Section 5 of this Agreement) prior to the end of December 31,
2006, all of the Grantee’s Performance Units shall be cancelled.

     (d) Notwithstanding anything to the contrary contained in this Section 3 or in any other
Section of this Agreement, if the Grantee has a written employment or severance agreement with the
Company or one of its subsidiaries, and such other agreement contains provisions relating to the
vesting by the Grantee in the Performance Units or the right of the Grantee to receive the Payment
Value (including, without limitation, vesting provisions upon the termination of employment of the
Grantee), and such provisions are different than the comparable provisions of this Agreement, then
the provisions of such other agreement shall govern and control.

     4. Payment. (a) Payment of Performance Units shall be made only in Cash.

     (b) Payment of Performance Units vesting on December 31, 2006, shall be made in the
amount of the Payment Value as soon as practicable following the close of the Company books at the
end of 2006, and in any event no later than March 15, 2007.

     (c) In the event of the Grantee’s death, Permanent Disability or Retirement, the Payment Value
of each vested Performance Unit shall be equal to the Initial Grant Value. Payment of such vested
Performance Units shall be made as soon as practicable following the Grantee’s death, Permanent
Disability or Retirement, as the case may be.

     (d) In the event of the Grantee’s involuntary Termination of Employment without Cause, the
Payment Value of each vested Performance Unit shall be determined using the performance measures
set forth in the grid attached as Exhibit A. Payment of such vested Performance Units
shall be made as soon as practicable following the close of the Company books at the end of 2006,
and in any event no later than March 15, 2007.

     (e) In the event of the death of a Grantee, any payment to which such Grantee is entitled
under the Plan shall be made to the beneficiary designated by the Grantee to receive the proceeds
of any noncontributory group life insurance coverage provided for the Grantee by the Company or a
subsidiary of the Company (“Group Life Insurance Coverage”). If the Grantee has not designated
such beneficiary, or desires to designate a different beneficiary, the Grantee may file with the
Company a written designation of a beneficiary under the Plan, which designation may be changed or
revoked only by the Grantee, in writing. If no designation of beneficiary has been made by a
Grantee under the Group Life Insurance Coverage or filed with the Company under the Plan,
distribution upon such Grantee’s death shall be made in accordance with the provisions of the Group
Life Insurance Coverage. If a Grantee is no longer an employee of the Company at the time of
death, no longer has any Group Life Insurance Coverage and has not filed a designation of
beneficiary with the Company under the Plan, distribution upon such Grantee’s death shall be made
to the Grantee’s estate.

 

 

     5. Termination of Employment. (a) For purposes of this Agreement, the
term “Termination of Employment” shall mean termination from active employment with the Company or a
subsidiary of the Company; it does not mean the termination of pay and benefits at the end of a
period of salary continuation (or other form of severance pay or pay in lieu of salary).

     (b) For purposes of this Agreement, if the Grantee has an employment or severance agreement,
employment shall be deemed to have been terminated for “Cause” only as such term is defined in the
employment or severance agreement. For purposes of this Agreement, if the Grantee does not have an
employment or severance agreement that defines the term “Cause,” the Grantee’s employment shall be
deemed to have been terminated for “Cause” if the Termination of Employment results from the
Grantee’s: (i) criminal conduct; (ii) deliberate and continual refusal to perform employment
duties on substantially a full time basis; (iii) deliberate and continual refusal to act in
accordance with any specific lawful instructions of an authorized officer or employee more senior
than the Grantee or a majority of the Board of Directors of the Company; or (iv) deliberate
misconduct which could be materially damaging to the Company or any of its business operations
without a reasonable good faith belief by the Grantee that such conduct was in the best interests
of the Company. A Termination of Employment shall not be deemed for Cause hereunder unless the
chief human resources officer of the Company shall confirm that any such Termination of Employment
is for Cause; provided, however, that the chief executive officer of the Company
shall be required to confirm that a Termination of Employment of the chief human resources officer
of the Company is for Cause. Any voluntary Termination of Employment by the Grantee in
anticipation of an involuntary Termination of Employment for Cause shall be deemed to be a
Termination of Employment for Cause.

     6. Transferability. Other than as specifically provided in this Agreement
with regard to the death of the Grantee, this Agreement and any benefit provided or accruing hereunder
shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or change; and any attempt to do so shall be void. No such benefit shall, prior to
receipt thereof by the Grantee, be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the Grantee.

     7. No Right to Employment. Neither the execution and delivery of this
Agreement nor the granting of the Performance Units evidenced by this Agreement shall constitute
any agreement or understanding, express or implied, on the part of the Company or its subsidiaries
to employ the Grantee for any specific period or in any specific capacity or shall prevent the
Company or its subsidiaries from terminating the Grantee’s employment at any time with or without
Cause.

     8. Application of Laws. The granting of Performance Units under this
Agreement shall be subject to all applicable laws, rules and regulations and to such approvals of
any governmental agencies as may be required.

     9. Notices. Any notices required to be given hereunder to the Company
shall be addressed to The Secretary, Reynolds American Inc., Post Office Box 2990, Winston-Salem, NC
27102-2990, and any notice required to be given hereunder to the Grantee shall be sent to the
Grantee’s address as shown on the records of the Company.

 

 

     10. Taxes. Any taxes required by federal, state or local laws to be
withheld by the Company in respect of the grant of Performance Units or payment of the Payment Value hereunder
shall be paid to the Company by the Grantee by the time such taxes are required to be paid or
deposited by the Company. The Grantee hereby authorizes the necessary withholding by the Company
to satisfy such tax withholding obligations prior to delivery of the Payment Value.

     11. Administration and Interpretation. (a) In consideration of the grant
of Performance Units hereunder, the Grantee specifically agrees that the Compensation Committee shall
have the exclusive power to interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan and Agreement as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all interpretation and
determinations made by the Compensation Committee shall be final, conclusive, and binding upon the
Grantee, the Company and all other interested persons. No member of the Compensation Committee
shall be personally liable for any action, determination or interpretation made in good faith with
respect to the Plan or the Agreement. The Compensation Committee may delegate its interpretive
authority to an officer or officers of the Company.

     (b) This Agreement is intended to comply with Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), and shall be construed and interpreted in accordance with such
intent. The Performance Units shall be subject to Section 409A of the Code and shall be paid in a
manner that will comply with Section 409A of the Code, including proposed, temporary or final
regulations or any other guidance issued by the Secretary of Treasury and the Internal Revenue
Service with respect thereto (the “Guidance”). Any provision of this Agreement that would cause
the Performance Units to fail to satisfy Section 409A of the Code shall have no force and effect
until amended to comply with Code Section 409A (which amendment may be retroactive to the extent
permitted by the Guidance).

     12. Amendment. This Agreement is subject to the Plan, a copy of which is
attached. The Board of Directors may amend the Plan and the Compensation Committee may amend this
Agreement at any time and in any way, except that, other than for adjustments under Section 11(b)
hereof and as otherwise provided by the Plan, any amendment of the Plan or this Agreement that
would impair the Grantee’s rights under this Agreement may not be made without the Grantee’s
written consent.

     13. Obligations of Grantee. (a) In consideration of the grant of
Performance Units hereunder, the Grantee, while both actively employed and in the event of Grantee’s
Termination of Employment for any reason, specifically agrees that within the term of this grant or
within one year following the payment of any amounts pursuant to the grant, if later: (i) the
Grantee will personally provide reasonable assistance and cooperation to the Company in activities
related to the prosecution or defense of any pending or future lawsuits or claims involving the
Company; (ii) the Grantee will promptly notify the Company upon receipt of any requests from anyone
other than an employee or agent of the Company for information regarding the Company, or if the
Grantee becomes aware of any potential claim or proposed litigation against the Company; (iii) the
Grantee will refrain from providing any information related to any claim or potential litigation
against the Company to any non-Company representatives without either the Company’s written
permission or being required to provide

 

 

information pursuant to legal process; (iv) the Grantee will not disclose or misuse any
confidential information or material concerning the Company; and (v) the Grantee will not engage in
any activity contrary or harmful to the interests of the Company. In further consideration of the
grant of Performance Units hereunder, the Grantee specifically agrees that if required by law to
provide sworn testimony regarding any Company-related matter: the Grantee will consult with and
have Company designated legal counsel present for such testimony (the Company will be responsible
for the costs of such designated counsel); the Grantee will confine his or her testimony to items
about which the Grantee has knowledge rather than speculation, unless otherwise directed by legal
process; and the Grantee will cooperate with the Company’s attorneys to assist their efforts,
especially on matters the Grantee has been privy to, holding all privileged attorney-client matters
in strictest confidence.

     (b) If the Company reasonably determines that the Grantee has materially violated any of the
Grantee’s obligations under this Agreement, then this Grant shall terminate, effective the date on
which such violation began (unless otherwise terminated sooner), and the Company may demand the
return of any amount paid to the Grantee hereunder and the Grantee hereby agrees to return such
amounts upon such demand. If after such demand the Grantee fails to return such amounts, the
Grantee acknowledges that the Company has the right to deduct from any amounts the Company owes to
the Grantee (including, but not limited to, wages or other compensation), or to commence judicial
proceedings against the Grantee, to recover such amounts and any and all of its attorney’s fees and
costs.

 

 

     14. GOVERNING LAW. THE LAWS OF THE STATE OF NORTH CAROLINA
SHALL GOVERN THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT,
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF LAWS.

     IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the Grantee have executed
this Agreement as of the Date of Grant first above written.

	 	 	 	 	 
	 

	 	REYNOLDS AMERICAN INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Authorized Signatory
	 
	 	 	 	 
	 
	 	 	 	 
	Grantee
	 	 	 	 
	 
	 	 	 	 
	Grantee’s Taxpayer Identification Number:
	 	 	 	 
	 
	 	 	 	 
	 
	 
	 	 	 	 
	Grantee’s Home Address:<PAGE>

                                                                    Exhibit 10.3

                       RETIREMENT AND CONSULTING AGREEMENT
         dated as of April 1, 2005, between KING PHARMACEUTICALS, INC.,
   a Tennessee corporation ("Employer"), and JAMES R. LATTANZI, an individual
               domiciled in the State of Tennessee ("Executive").

            WHEREAS Executive is presently employed by Employer and serves as
its Chief Financial Officer and as a member of its Board of Directors;

            WHEREAS Executive and Employer have mutually agreed that Executive
will retire and cease to be so employed and to so serve as of the Effective Date
(as defined below) and that Executive will provide consulting services to
Employer for a period of time following the Effective Date; and

            WHEREAS Executive is eligible to participate in the Severance Pay
Plan: Tier I of Employer (the "Severance Plan"), which is incorporated herein by
reference;

            NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:

                                    ARTICLE I

                     Retirement and Severance Plan Benefits

                  SECTION 1.01. Retirement. Executive shall retire, and the
employment of Executive with Employer and its affiliates shall terminate,
effective as of June 1, 2005 (the "Effective Date"), and effective as of such
date Executive shall resign as a director, officer and employee of Employer and
its affiliates. Except as provided in Section 1.02, Executive's retirement and
termination of employment pursuant to this Agreement shall be deemed not to be a
termination for "cause" or a resignation for "good reason" for purposes of any
employee benefit plan, program, agreement or arrangement sponsored or maintained
by Employer or its affiliates or to which Employer or its affiliates is a party.

                  SECTION 1.02. Severance Plan Benefits. (a) Employer
acknowledges and agrees that Executive's retirement and termination of
employment pursuant to this Agreement shall be treated for all purposes of the
Severance Plan as a "Separation from Service without Cause and not following a
Change in Control" (within the meaning of Section 3(1)(C) of the Severance
Plan). Following the Effective Date, Executive and Employer shall each honor and
comply with their respective obligations under the Severance Plan (as modified
by Section 1.02(b)).

                                       1

<PAGE>

            (b) Notwithstanding anything contained herein or in the Severance
Plan to the contrary:

                (i) Executive shall execute and deliver to Employer a Waiver,
                Release and Non-solicitation, Noncompete and Nondisclosure
                Agreement (as defined in the Severance Plan) (the "Waiver") no
                later than May 23, 2005, and Executive's signature of such
                Waiver shall be dated no later than such date;

                (ii) Employer hereby waives, releases and discharges Executive
                from Executive's obligations under Sections 8(a)(i) and 8(a)(ii)
                of the Severance Plan, and Employer agrees that Executive's
                rights under the Severance Plan shall not be affected in any
                manner as a result of any violation of such provisions of the
                Severance Plan;

                (iii) Employer shall pay on behalf of Executive the full cost of
                the Severance Benefit coverage described in Section 4(b) of the
                Severance Plan, and Employer shall pay to Executive annually an
                amount equal to the amount of federal income tax Executive will
                be required to pay on such benefits;

                (iv) in the event that Executive has not revoked the Waiver
                prior to the Effective Date, Employer shall pay the Severance
                Pay (as defined in the Severance Plan) to Executive in a lump
                sum on the Effective Date; and

                (v) any gross-up payment made to Executive pursuant to Section 6
                of the Severance Plan shall be made no later than June 15, 2005.

                  SECTION 1.03. Exclusive Rights. Except for Executive's rights
under this Agreement, the Severance Plan (as modified by Section 1.02(b)) and
the 1997 Incentive and Nonqualified Stock Option Plan for Employees of King
Pharmaceuticals, Inc. (which is incorporated herein by reference), Executive
shall not be entitled to, and Employer shall have no liability or obligation to
pay or provide, any compensation, benefits or other amounts with respect to
Executive's employment or the termination thereof, and Executive hereby waives
any and all rights Executive may have to any such compensation, benefits or
other amounts.

                  SECTION 1.04. Cooperation. From and after the date hereof,
Executive shall provide his reasonable cooperation with any litigation, suit,
action, proceeding or other legal matter (or any appeal therefrom) that relates
to events occurring during his employment with Employer and its affiliates or
his performance of consulting services hereunder, provided that (i) any time
spent by Executive during the Consulting Term (as defined below) in providing
such cooperation shall be credited against the consulting services Executive is
required to provide pursuant to Article II and (ii)

                                       2

<PAGE>

Employer shall reimburse Executive for expenses reasonably incurred in
connection with such cooperation.

                  SECTION 1.05. Press Release. Executive and Employer shall
cooperate in good faith to prepare a mutually acceptable press release or other
public announcement regarding Executive's retirement and Executive's agreement
to provide consulting services to Employer after the Effective Date; provided,
however, that nothing in this Section 1.05 shall prohibit or limit Employer's
ability to make public or private announcements, statements or other
communications as required to comply with applicable law or the rules of any
securities exchange or trading system on which Employer securities are listed,
traded or quoted.

                                   ARTICLE II
                                   Consulting

                  SECTION 2.01. Consulting Services. (a) Employer shall retain
Executive, and Executive shall serve, as a consultant to Employer during the
period from the Effective Date through the second anniversary of the Effective
Date (the "Consulting Term"). During the portion of the Consulting Term ending
on the first anniversary of the Effective Date (the "Initial Period"), Executive
shall provide an average of no more than 20 hours of consulting services per
week, and Executive acknowledges and agrees that Employer shall be entitled to
determine the number of hours of services for each week during such period, but
in no event shall Employer request more than 30 hours of services for any such
week. During the remaining portion of the Consulting Term (the "Remaining
Period"), Executive shall provide such hours of consulting services as may be
requested by Employer in its discretion, but in no event shall Employer request
more than 20 hours of services for any week during such period. During the
Consulting Term, Executive shall assist and advise Employer and its employees
with respect to matters in which Executive was involved or had knowledge from
his services as an employee of Employer, including by facilitating Employer's
efforts to train Executive's successor as Chief Financial Officer. In rendering
such consulting services, Executive shall report to the Chief Executive Officer
of Employer (the "CEO") or to such other person as may be designated from time
to time by the CEO. Executive shall perform his services hereunder (i) primarily
at the corporate headquarters of Employer in Bristol, Tennessee and at
Employer's offices in Princeton, New Jersey, (ii) from time to time, at
Employer's request, at locations related to litigation or other legal matters
involving or affecting Employer or its affiliates and (iii) at such other
locations as may be mutually agreed from time to time by Employer and Executive.
Executive acknowledges that his duties and responsibilities hereunder will
require him to travel on business from time to time, and for such purposes
Employer shall make its corporate aircraft reasonably available to Executive.
Any time spent by Executive in connection with such travel shall be credited
against the consulting services Executive is required to provide pursuant to
this Article II. Executive may perform his consulting services hereunder by
telephone or email in appropriate circumstances reasonably acceptable to
Employer. Executive shall serve

                                       3

<PAGE>

Employer in good faith and to the best of Executive's abilities in connection
with the performance of his consulting services hereunder.

            (b) Notwithstanding anything in this Article II to the contrary, in
the event that Executive accepts or commences active, full-time employment with
any person or entity that is a direct competitor with Employer or its affiliates
(as determined by Employer in its reasonable discretion) during the Consulting
Term, Employer may, in its reasonable discretion, elect to (i) continue the
consulting arrangements described in this Article II on the terms and conditions
set forth herein or (ii) terminate such arrangements (other than Employer's
obligation under Section 2.02 to pay the retainer during the Initial Period)
effective as of a date specified by Employer. Following the effective date of
any such termination, (i) Executive shall have no obligation under this Article
II to provide consulting services to Employer and (ii) Employer shall have no
obligation under this Article II to pay any amount to Executive (other than any
retainer earned but unpaid under Section 2.02 and any business expense incurred
but not reimbursed under Section 2.03, in each case as of the effective date of
such termination); provided, however, that such termination shall have no effect
on (A) Employer's obligation under Section 2.02 to pay the retainer during the
Initial Period or (B) any other provision of this Agreement, including
Executive's obligations under Article I.

                  SECTION 2.02. Retainer. In consideration of all consulting
services rendered pursuant to this Article II, without regard to the number of
hours of consulting services requested by Employer, Employer shall pay Executive
a cash retainer at a monthly rate of (i) during the Initial Period, $33,334.00
and (ii) during the Remaining Period, $28,349.33, which in each case shall be
paid in advance on the first business day of the applicable month, commencing on
the Effective Date. Employer's obligation to pay such retainer during the
Initial Period shall not be affected by either (i) Employer's termination of the
consulting arrangements described in this Article II pursuant to Section 2.01(b)
or (ii) Executive's disability or death, in which case such retainer shall be
paid to Executive or to his personal representative.

                  SECTION 2.03. Expense Reimbursement. Employer shall reimburse
Executive for all necessary and reasonable "out-of-pocket" business expenses
incurred by Executive on behalf of Employer in the performance of his consulting
duties under this Article II, subject to the terms and conditions of the
applicable expense reimbursement policy of Employer as in effect from time to
time.

                  SECTION 2.04. Independent Contractor Status. (a) Executive
shall at all times during the Consulting Term be an independent contractor with
respect to Employer, and there shall not be implied any relationship of
employer-employee, partnership, joint venture, principal-agent or any similar
relationship by the provisions of this Agreement. From and after the Effective
Date, Executive shall not be entitled to participate in any employee benefit
plan, program or arrangement or other benefits or conditions of employment
available to the employees of Employer and its affiliates, except as expressly
provided in the Severance Plan (as modified by Section 1.02(b)(ii)).

                                       4

<PAGE>

            (b) From and after the Effective Date, Executive shall not have any
authority to act as an agent of Employer or its affiliates, and Executive shall
not represent to the contrary to any person. From and after the Effective Date,
under no circumstances shall Executive have or claim to have power of decision
in any activity on behalf of Employer or its affiliates, nor shall Executive
have the power or authority to obligate, bind or commit Employer or its
affiliates in any respect. From and after the Effective Date, Executive shall
not direct the work of any employee of Employer or its affiliates, make any
management decisions on behalf of Employer or its affiliates or undertake to
commit Employer or its affiliates to any course of action in relation to third
parties. Employer shall not exercise and shall not have the authority to
exercise such level of control over Executive as would indicate or establish
that a relationship of employer-employee exists between Employer and Executive,
except that Employer may specify the results it desires Executive to achieve
during the Consulting Term and may control and direct Executive in that regard.
Subject to the foregoing, Executive shall have full and complete control over
the manner and method of rendering consulting services hereunder.

                                   ARTICLE III

                                  Miscellaneous

                  SECTION 3.01. Assignment. This Agreement is personal to
Executive and shall not be assignable by Executive other than by will or the
laws of descent and distribution, and any attempt by Executive to delegate his
duties in violation hereof shall be null and void. Employer, may assign this
Agreement and its rights and obligations hereunder to any affiliate, or a
successor in interest to substantially all the business or assets, of Employer.
Upon such assignment, the rights and obligations of Employer hereunder shall
become the rights and obligations of such affiliate or successor, but Employer
shall remain liable for its obligations hereunder as a guarantor.

                  SECTION 3.02. Successors. This Agreement shall be binding upon
and shall inure to the benefit of the successors of Employer and the personal or
legal representatives, executors, administrators, successors, distributes,
devisees and legatees of Executive. Executive acknowledges and agrees that all
his covenants and obligations to Employer, as well as the rights of Employer
under this Agreement, shall run in favor of and will be enforceable by Employer,
its affiliates and their successors and assigns.

                  SECTION 3.03. Entire Agreement. This Agreement contains the
entire understanding of the parties with respect to the subject matter hereof,
and all oral or written agreements or representations, express or implied, with
respect to the subject matter hereof are set forth in this Agreement.

                  SECTION 3.04. Amendment. This Agreement shall not be amended
or modified except by written instrument signed by the parties hereto.

                                       5

<PAGE>

                  SECTION 3.05. Taxes and Withholding. Employer and its
affiliates shall be entitled to deduct or withhold from any amounts payable
under this Agreement all Federal, state, local, foreign or other taxes as are
required to be deducted or withheld pursuant to applicable law.

                  SECTION 3.06. Notice. All notices, requests, demands and other
communications required or permitted to be given under the terms of this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand, overnight courier or facsimile addressed to the other party
as set forth below:

       If to Employer:              King Pharmaceuticals, Inc.
                                    501 Fifth Street
                                    Bristol, Tennessee 37620
                                    Facsimile: 423-989-7090
                                    Attention: Chief Executive Officer

       If to Executive:             James R. Lattanzi

                                    Johnson City, TN 37601

The parties may change the address to which notices under this Agreement shall
be sent by providing written notice to the other in the manner specified above.

                  SECTION 3.07. Governing Law; Jurisdiction; Waiver of Jury
Trial. This Agreement shall be governed by and construed in accordance with the
laws of the State of Tennessee without regard to the conflicts of law principles
thereof. Each party irrevocably and unconditionally submits to the exclusive
jurisdiction and venue of the Law Court for Sullivan County, Tennessee, Bristol
Division, for the purposes of any suit, action or other proceeding arising out
of this Agreement, each party agrees to commence any such action, suit or
proceeding in such court and each party irrevocably and unconditionally waives
any objection to the laying of venue of any action, suit or proceeding arising
out of this Agreement in such court. Each party hereby waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any litigation directly or indirectly arising out of, under or in
connection with this Agreement.

                  SECTION 3.08. Severability. To the extent that any provision
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any jurisdiction, then such provision shall, as to
such jurisdiction, be modified or restricted to the extent necessary to make
such provision valid, binding and enforceable and such invalidity, illegality or
unenforceability shall not invalidate or render unenforceable such provision in
any other jurisdiction or invalidate or render unenforceable any other provision
hereof.

                                       6

<PAGE>

                  SECTION 3.09. No Waiver. The failure of a party to insist upon
strict adherence to any provision of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the right
thereafter to insist upon strict adherence to such provision or any other
provision of this Agreement.

                  SECTION 3.10. Counterparts. This Agreement maybe signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

                  SECTION 3.11. Construction. The headings in this Agreement are
for convenience only, are not a part of this Agreement and shall not affect the
construction of the provisions of this Agreement. As used in this Agreement, the
words "include" and "including", and variations thereof, shall not be deemed to
be terms of limitation but rather shall be deemed to be followed by the words
"without limitation".

                  SECTION 3.12. Enforcement. The enforcement by Executive of his
rights under this Agreement shall not constitute a breach of the Waiver.

                  SECTION 3.13. Indemnification. (a) (i) Employer shall
indemnify, defend and hold harmless Executive, who has been a director or
officer of Employer or any of its subsidiaries, against all losses, claims,
damages, costs and expenses (including reasonable attorneys' fees), liabilities,
judgments and, subject to the proviso of this sentence, settlement amounts that
are paid or incurred in connection with any claim, action, suit, proceeding or
investigation (whether civil, criminal, administrative or investigative and
whether asserted or claimed prior to, at or after the Effective Date) that is
(A) based on, or arises out of, the fact that Executive is or was a director or
officer of Employer or any of its subsidiaries, or (B) based on, or arising out
of, or pertaining to this Agreement or the transactions contemplated hereby, in
each case to the fullest extent a corporation is permitted under applicable law
to indemnify its own directors or officers, as the case may be; provided,
however, that Employer shall not be liable for any settlement of any claim
effected without its written consent (which consent shall not be unreasonably
withheld). Without limiting the foregoing, in the event that any such claim,
action, suit, proceeding or investigation is brought against Executive (whether
arising prior to or after the Effective Date), (w) Employer following the
Effective Date will pay all expenses of the disposition of any such claim,
action, suit, proceeding or investigation to Executive to the full extent
permitted by applicable law promptly after statements therefor are received and
otherwise advance to Executive upon request reimbursement of documented expenses
reasonably incurred, in either case to the extent not prohibited by the
Tennessee Business Corporation Act ("TBCA"); provided, however, that the person
to whom expenses are advanced provides any undertaking required by applicable
law to repay such advance if it is ultimately determined that such person is not
entitled to indemnification; (x) Executive shall retain counsel reasonably
satisfactory to Employer; (y) Employer following the Effective Date shall pay
all reasonable fees and expenses of such counsel for Executive (subject to the
penultimate sentence of this paragraph) and all costs and expenses of Executive
in connection with seeking and obtaining indemnification from Employer, in each
case promptly as

                                       7

<PAGE>

statements therefor are received and (z) Employer following the Effective Date
shall use all commercially reasonable efforts to assist in the defense of any
such matter. In the event of any dispute as to whether Executive's conduct
complies with the standards set forth under the TBCA and Employer's Charter or
Employer's By-laws, a determination shall be made by independent counsel
mutually acceptable to Employer and Executive; provided, however, that Employer
following the Effective Date shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld).
Without limiting the foregoing, to the extent that Executive is, by reason of
the fact that Executive is or was a director or officer of Employer or any of
its subsidiaries, a witness in any claim, action, suit, proceeding or
investigation to which Executive is not a party, Executive shall be indemnified
and held harmless against all costs and expenses in connection therewith.

                  (ii) Employer shall not enter into any settlement of any claim
in which Employer is jointly liable with Executive (or would be if joined in
such claim) unless such settlement provides for a full and final release of all
claims asserted against Executive.

            (b) Except to the extent required by law, Employer following the
Effective Date shall not take any action so as to amend, modify, limit or repeal
the provisions for indemnification of Executive contained in the certificates or
articles of incorporation or by-laws (or other comparable charter documents) of
Employer and its subsidiaries following the Effective Date in such a manner as
would adversely affect the rights of Executive to be indemnified by such
corporations in respect of his serving in such capacities prior to the Effective
Date. Employer following the Effective Date shall honor all of its
indemnification obligations to Executive existing as of the Effective Date and
shall maintain in effect adequate directors' and officer's liability insurance
with respect to such indemnification obligations.

            (c) The provisions of this Section 3.13 are intended to be for the
benefit of, and shall be enforceable by, Executive and his heirs and legal
representatives, and shall be in addition to, and shall not impair, any other
rights Executive may have under Employer's Charter, other organizational
documents of Employer or any of its subsidiaries, the TBCA or otherwise.

                 REMAINDER OF THIS PACE INTENTIONALLY LEFT BLANK

                                       8

<PAGE>

            IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.

                              KING PHARMACEUTICALS, INC.

                                by  /s/ Brian A. Markison  4/5/05
                                    --------------------------------------------
                                    Name: Brian A. Markison
                                    Title: President and Chief Executive Officer

                              JAMES R. LATTANZI,

                                    /s/  JAMES R. LATTANZI  4/1/05
                                    --------------------------------------------

                                       9

<PAGE>

                                    EXHIBIT 2

                           KING PHARMACEUTICALS, INC.
                           SEVERANCE PAY PLAN: TIER I

                      WAIVER, RELEASE AND NON-SOLICITATION,
                     NONCOMPETE AND NONDISCLOSURE AGREEMENT

      1. In consideration for the Severance Pay and/or Severance Benefits to be
provided to me under the terms of the King Pharmaceuticals, Inc. Severance Pay
Plan: Tier I ("Plan"), and after having had a full, unhurried opportunity to
consult with an attorney of my choice with respect to this Agreement, including
its consent and. final binding effect, I, on behalf of myself and my heirs,
executors, administrators, attorneys and assigns, hereby waive, release and
forever discharge King Pharmaceuticals, Inc. (hereinafter referred to as the
"Company") and its parent (if any), subsidiaries, divisions and Affiliates (as
defined in the Plan), whether direct or indirect, its and their joint ventures
and joint venturers (including its and their respective directors, officers,
employees, shareholders, partners and agents, past, present, and future), and
each of its and their respective successors and assigns (hereinafter
collectively referred to as "Releases"), from any and all known or unknown
demands, damages, actions, causes of action, claims, losses, or liabilities of
any kind which have or could be asserted against the Releasees arising out of or
related to my employment with and/or the Separation of my employment with the
Company and/or any of the other Releasees and/or any other occurrence from the
beginning of time up to and including the date of this Agreement, including but
not limited to:

            (a) All claims, actions, causes of action or liabilities arising
      under Title VII of the Civil Rights Act of 1964, as amended, the Age
      Discrimination in Employment Act, as amended, the Employee Retirement
      Income Security Act, as amended, the Rehabilitation Act of 1973, as
      amended, the Americans with Disabilities Act, as amended, the Family and
      Medical Leave Act, as amended, and/or any other federal, state, municipal,
      or local employment discrimination statutes (including, but not limited
      to, claims based on age, sex, attainment of benefit plan rights, race,
      religion, national origin, marital status, sexual orientation, ancestry,
      harassment, parental status, handicap, disability, retaliation, and
      veteran status); and/or

            (b) All claims, actions, causes of action. or liabilities arising
      under any other federal, state, municipal, or local statute, law,
      ordinance or regulation; and/or

            (c) Any and all other claims whatsoever including, but not limited
      to, claims for severance pay, claims based upon breach of contract,
      wrongful Separation, retaliatory discharge, defamation, intentional
      infliction of emotional distress, tort, personal injury, invasion of
      privacy, violation of public policy, negligence and/or any other common
      law, statutory or other claim whatsoever

                                       10

<PAGE>

      arising out of or relating to my employment with and/or the Separation of
      my employment with the Company and/or any of the other Releasees.

      2. I also agree never to sue any of the Releasees or become party to a
lawsuit on the basis of any claim of any type whatsoever arising out of or
related to my employment with and/or the Separation of my employment with the
Company and/or any of the other Releasees.

      I further agree not to make any public statement or statements, to the
press or otherwise, concerning the Company's Board of Directors, management,
business objectives, status of its securities, its management practices,
products, or other sensitive information, without first receiving the written
consent of the Company's Executive Vice President of Human Resources and its
Chief Executive Officer, and I will not take any action which would cause the
Company, or its employees or agents, embarrassment or humiliation or otherwise
cause or contribute to the Company, or any such person, being held in disrepute
by the general public or the Company's employees, clients, or customers.

      3. I further acknowledge and agree in the event that I breach the
provisions of paragraph 2 above and/or the Non-Solicitation, Non-Compete or
Nondisclosure provisions of the Plan, (a) the Company shall not be obligated to
continue payment of the Severance Pay and the availability of Severance Benefits
to me, (b) I shall be obligated to repay to the Company upon written demand
ninety percent (90%) of the amount of Severance Pay and cost of the Severance
Benefits paid or provided to me, plus simple interest at the rate of ten percent
(10%) per annum from the date of payment of such pay and/or benefits, and (c) I
shall be obligated to pay the Company its costs and expenses in enforcing the
provisions of this Agreement and the Plan (including court costs, expenses and
reasonable legal fees), and the foregoing shall not affect the validity of this
Agreement and shall not be deemed a penalty or a forfeiture. In the event I
breach the notice requirements of Section 4(b) of the Plan regarding eligibility
for alternate welfare plan coverage after a Qualifying Separation, I understand
and agree that the provisions of the prior sentence shall apply, but solely with
respect to the Severance Benefits for which such required notice was not timely
provided. Executive specifically acknowledges that the restrictions,
prohibitions, and other provisions of this paragraph and the Non-Solicitation,
Non-Compete and Nondisclosure restrictions of the Plan are reasonable, fair, and
equitable in scope, terms, and duration, and are a material inducement to the
Company to provide the benefits described in the Plan. Executive agrees that the
obligations in this Agreement are necessary in order to protect the Company's
legitimate business interests; its trade secrets and confidential information;
its relationships with its customers and distributors; its investment in its
employees; and its goodwill, in light of the nature and extent of the business
conducted by the Company. Executive further agrees that upon any breach or
threatened breach of these obligations, the Company shall be entitled to
injunctive relief, both temporary and permanent, without the necessity of
posting a bond, as well as, and in addition to, all other available remedies,
including such damages as may be permitted by law, all of which shall be
cumulative and not exclusive.

                                       11

<PAGE>

      4. I further waive my right to any monetary recovery should any federal,
state, or local administrative agency pursue any claims on my behalf arising out
of or related to my employment with and/or separation from employment with the
Company and/or any of the other Releasees.

      5. I further waive, release, and discharge Releasees from any
reinstatement rights which I have or could have and I acknowledge that I have
not suffered any on-the-job injury for which I have not already filed a claim;
and I hereby unconditionally agree that I shall not now or at any time in the
future, either individually or through others, as an independent contractor or
otherwise in. any capacity, directly or indirectly, apply for or otherwise seek
employment or any other arrangement with the Company and/or any of the other
Releasees to provide services to or on behalf of any of the same, without the
prior written consent of the Executive Vice President of Human Resources of the
Company.

      6. I acknowledge that I have been given at least forty-five (45) days to
consider this Waiver and Release Agreement thoroughly and I was advised to
consult with my personal attorney, if desired, before signing below.

      7. I understand that I may revoke this Agreement within seven (7) days
after its signing and that any revocation must be made in writing and submitted
within such seven day period to the Plan Administrator. I further understand
that if I revoke this Agreement, I shall not receive Severance Pay or Severance
Benefits.

      8. I FURTHER UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.

      9. I understand that nothing in this Agreement shall affect any obligation
which the Company may have to indemnify me pursuant to Section 9 of the
Company's charter or Article VII of the Company's bylaws.

      10. I acknowledge and agree that this Agreement is given in exchange for
consideration in, addition to anything of value to which I am already entitled.

      11. I acknowledge and agree that if any provision of this Agreement is
found, held or deemed by a court of competent jurisdiction to be void, unlawful
or unenforceable under any applicable statute or controlling law, the remainder
of this Agreement shall continue in full force and effect. If any portion of
this Agreement or the Plan relating to Non-Solicitation, Non-Compete or
Nondisclosure is held by a court of competent jurisdiction to be unreasonable,
unenforceable, arbitrary, or against public policy, then such portion shall be
considered divisible as to time, geographical area, and prohibited activities,
and the remaining provisions shall remain in effect, and the parties agree to
reasonable modification, including but not limited to modifications as to time,
geographical area, and prohibited activities, as the court shall decide in order
to reflect the intent of the parties.

                                       12

<PAGE>

      12. This Agreement is deemed made and entered into in the State of
Tennessee, and in all respects shall be interpreted, enforced and governed under
the internal laws of the State of Tennessee, to the extent not preempted by
applicable federal law.

      Jurisdiction and venue over any dispute under this Agreement shall lie
solely in the Law Court for Sullivan County, Tennessee, Bristol Division.

      13. I further acknowledge and agree that I have carefully read and fully
understand all of the provisions of this Agreement and that I voluntarily and
knowingly enter into this Agreement by signing below. No modification of this
Agreement shall be effective unless made in writing and signed by both Executive
and the Company.

      14. ACKNOWLEDGMENT OF COMPLIANCE

      Because this Agreement includes a release and. waiver as to claims under
the AGE DISCRIMINATION IN EMPLOYMENT ACT ("ADEA"), your signature below
acknowledges that it complies with the Older Worker Benefit Protection Act
("OWBPA") of 1990 and further acknowledges that you confirm, understand, and
agree to the terms and conditions of this Agreement; that these terms are
written in lay person terms, and that you have been fully advised of your right
to seek the advice and assistance of consultants, including an attorney, as well
as tax advisors, to review this agreement.

      It also acknowledges that you do not waive any rights or claims under the
ADEA that may arise after the date this Agreement is signed by you, and
specifically; that under this Agreement, you are receiving consideration beyond
anything of value to which you are already entitled. It is understood by you
that you have been advised to consult with an attorney of your choice before
signing. You also understand that you have up to forty-five (45) full days to
consider whether to sign this release and agreement. By signing this release on
the date shown below, you knowingly and voluntarily elect to forego waiting the
portion then remaining of the forty-five (45) full days to consider whether to
sign this release and agreement.

      15. RIGHT OF REVOCATION

      Your signature also acknowledges that, in compliance with the OWBPA
condition above, you have been fully advised by the Company of your right to
revoke and nullify this release and agreement, which right must be exercised, if
at all, within seven (7) days of the date of your signature. Any revocation of
this Agreement must be in writing, addressed to the Company, to the attention of
the Plan Administrator of the King Pharmaceuticals, Inc. Severance Pay Plan:
Tier I, and the Company must be notified within the foregoing seven (7) day
period. This Agreement will not become effective or enforceable until the
expiration of the 7-day period.

                                            13

<PAGE>
      16. BINDING EFFECT

      Upon signing this agreement, it will become effective and binding upon you
and the Company and upon the respective successors, assigns, heirs and personal
representatives as is discussed in paragraph 1 above.

                                JAMES R. LATTANZI
                                ------------------------------------------
                                Name of Eligible Executive -- Please Print

                                /s/ JAMES R. LATTANZI
                                ---------------------------------
                                (Signature of Eligible Executive)

                                5/12/05
                                ---------------------------------
                                (Date)

                                PLEASE RETURN TO:

                                Plan Administrator
                                King Pharmaceuticals, Inc.
                                Severance Pay Plan: Tier I

                                       14

<PAGE>

                                    EXHIBIT 3

                  WELFARE PLANS INCLUDED IN SEVERANCE BENEFITS

                                       15

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]