Document:

Ex-10.27(e) W. Paul Rutledge Employment Agreement

 

Exhibit 10.27(e)

EMPLOYMENT AGREEMENT

William P. Rutledge

     This EMPLOYMENT AGREEMENT (the “Agreement”) dated November 16, 2006 is entered into by
and between Hercules Holding II, LLC (the “Company”) and William P. Rutledge (the
“Executive”).

     In connection with the merger contemplated under that certain Agreement and Plan of Merger by
and among HCA Inc. (“HCA”), the Company and Hercules Acquisition Corporation, dated July
24, 2006 (the “Merger Agreement”, and such transaction being the “Merger”) the
Company desires to employ Executive and to enter into an agreement embodying the terms of such
employment, effective as of the consummation of the Merger (the “Closing”);

     After the Closing, the Company will own substantially all of the stock of HCA; and

     Executive desires to accept such employment and enter into such an agreement.

     In consideration of the promises and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:

     1. Term of Employment; Effectiveness. Subject to the occurrence of the Closing,
Executive shall be employed by HCA Management Services, L.P., an affiliate of HCA existing solely
as an employment vehicle for corporate employees of HCA, on the terms and subject to the conditions
set forth in this Agreement until Executive’s employment is terminated in accordance with Section 7
of this Agreement (the “Employment Term”). Notwithstanding any other provision of this Agreement,
the operative provisions of this Agreement shall become effective only upon the Closing Date (as
defined in the Merger Agreement). In the event the Merger Agreement is terminated for any reason
without the Closing Date having occurred, this Agreement shall be terminated without further
obligation or liability of either party. Upon the Closing, the Company will cause HCA to assume
this Agreement and all references to “Company” contained herein shall at all times thereafter refer
to HCA.

     2. Position.

          a. During the Employment Term, Executive shall serve as the President-Central Group of HCA.
In such position, Executive shall have such duties, authority and responsibility as shall be
determined from time to time by the Chief Executive Officer, which duties, authority and
responsibility are consistent with his existing position with HCA with respect to the business of
HCA. Executive shall, if requested, also serve as a member of the Board of Directors of any
affiliate of the Company, without additional compensation.

          b. During the Employment Term, Executive will devote Executive’s full business time and best
efforts to the performance of Executive’s duties hereunder and will not engage in any other
business, profession or occupation for compensation or otherwise which would conflict or interfere
with the rendition of such services either directly or indirectly, without the prior written
consent of the Board of Directors of HCA (the “Board”); provided that

 

 

nothing herein shall preclude Executive, subject to the prior approval of the Board, from
accepting appointment to or continue to serve on any board of directors or trustees of any business
corporation or any charitable organization; provided in each case, and in the aggregate,
that such activities do not conflict or interfere with the performance of Executive’s duties
hereunder or conflict with Section 8.

     3. Base Salary. During the Employment Term, HCA shall pay Executive a base salary at
the annual rate of $650,000 payable in regular installments in accordance with HCA’s normal payroll
practices. The Board will review Executive’s salary annually, and Executive shall be entitled to
such increases in Executive’s base salary, if any, as may be determined in the sole discretion of
the Board, based upon such review. Executive’s annual base salary, as in effect from time to time,
is hereinafter referred to as the “Base Salary.”

     4. Annual Bonus.

          a. With respect to the 2006 fiscal year, Executive shall be eligible to receive the annual
bonus to which Executive is otherwise entitled under the HCA 2006 Senior Officer Performance
Excellence Program as a “covered officer” (as defined therein), to be paid at the target level on
the Closing Date; pursuant to such program, and as set forth in the Merger Agreement.

          b. With respect to each full fiscal year of HCA (a “Fiscal Year”) occurring
during the Employment Term, beginning with the 2007 Fiscal Year, Executive shall be eligible to
earn, pursuant to an annual bonus program to be adopted by the Board, an annual bonus award (an
“Annual Bonus”) equal to a percentage of Executive’s Base Salary, based upon the extent to
which annual performance targets established by the Board are met or exceeded. The Annual Bonus,
if any, shall be paid to Executive within two and one-half (2.5) months after the end of the
applicable Fiscal Year. For the 2007 Fiscal Year, Executive shall be eligible to earn a target
bonus of (i) 60% of Base Salary (the “Target Bonus”) if annual performance targets are met,
(ii) 50% of the Target Bonus if a lower “threshold” level of performance is achieved, or (iii) two
times the Target Bonus if “maximum” performance goals are achieved, with the Annual Bonus amount
being interpolated, in the sole discretion of the Board, in the event that performance results
exceed “threshold” goals but do not exceed “maximum” goals. For the 2007 Fiscal Year, “target”
performance will be based 50% on $4,407 million in EBITDA for HCA and 50% on $989 million EBITDA
for the Central Group (which will be calculated in the same way it is calculated for purposes of
the vesting of options granted under the New Option Plan (as defined below) that vest based on the
attainment of EBITDA targets), “threshold” performance will be 96.4%% of “target” and “maximum”
performance will be 103.6% “of target” performance (with appropriate adjustments by the Board for
extraordinary transactions and changes in capital expenditures). With respect to the 2008 Fiscal
Year, the Board shall in good faith attempt to provide Annual Bonus opportunities to Executive that
are consistent with those applicable to the 2007 Fiscal Year, unless doing so would be adverse to
the interests of HCA, the Company or their shareholders. For later fiscal years, the Board will
set bonus opportunities in consultation with the Chief Executive Officer of HCA.

     5. Employee Benefits and Business Expenses. During the Employment Term, Executive
shall be entitled to participate in HCA’s pension and welfare benefit, deferred

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compensation, cash incentive compensation and perquisite plans as in effect from time to time
for senior executives of HCA (collectively “Employee Benefits”). In addition, during the
Employment Term, reasonable business expenses incurred by Executive in the performance of
Executive’s duties hereunder shall be reimbursed by HCA in accordance with HCA’s policies. During
the Employment Term, HCA shall also (a) provide Executive with Director’s and Officer’s
indemnification and insurance coverage to the extent that the Board determines to be reasonable, in
its sole discretion, for a company of the nature and size of HCA and (b) shall continue Executive’s
participation in HCA’s Supplemental Executive Retirement Plan until such time as Executive has
become fully vested in the maximum benefit available to the Executive under that plan (including
achieving the maximum years of service) in accordance with the terms of the Merger Agreement.

     6. Equity Arrangements.

          a. In connection with the Merger, Executive shall (i) participate in the equity compensation
program established by HCA effective as of the Closing, pursuant to which, on the Closing,
Executive shall receive a grant of options to purchase shares of common stock of HCA (with an
exercise price of $51.00 per share) pursuant to a stock incentive plan to be adopted by HCA (the
“New Options”, and any shares of common stock acquired upon exercise of such New Options,
“Option Stock”, with the plan being the “New Option Plan”), (ii) be permitted to
rollover existing HCA stock options and/or shares of HCA common stock (or have such options and/or
shares cashed out in connection with the Merger and (iii) execute a stockholder’s agreement and
such other related agreements that are in forms reasonably acceptable to Executive and the Company
(such agreements, together with the option grant and stock incentive plan, the “Equity
Agreements”). Executive’s New Options (ignoring Executive’s possible receipt of 2x Time
Options, as defined and discussed below in Section 6(b)) will cover approximately 0.013125 times
10% of the fully diluted equity of HCA on the Closing Date (10% of the fully diluted equity of HCA
on the Closing Date being the “Option Pool”).

          b. HCA will reserve 10% of the Option Pool to be granted on the following terms (these options
being the “2x Time Options”). HCA agrees that after Closing Date, it will grant 100% of
the 2x Time Options to one or more of Jack Bovender, Richard Bracken, R. Milton Johnson, Samuel
Hazen, W. Paul Rutledge, Beverly Wallace, and Charles Hall (the “Tier 1 Executives”). The
individual allocations will be based upon each executive’s contribution to HCA and the Company
between the Closing and the date of grant as determined by the Board in consultation with the Chief
Executive Officer (provided that the fact that Jack Bovender may have retired prior to the grant
date will not be held against him in making such allocation and shall not preclude him from
receiving 2x Time Options). A percentage of the 2x Time Options will be vested and exercisable on
the date of grant, such percentage corresponding to the percentage of the period measured between
the Closing Date and the fifth anniversary of the Closing Date that has elapsed as of the grant
date. The 2x Time Options will otherwise vest pursuant to the schedule generally used in
connection with HCA’s other time-vesting options, subject to continued employment (or special
provisions governing retirement as may be mutually agreed to by an Executive and the Company or
HCA). The 2x Time Options will have an exercise price of $102 per share (subject to adjustment to
take into account any share splits, extraordinary cash dividends, or other adjustment events under
Section 8 of the New Option Plan, in any case made on or after Closing). The Board will in good
faith attempt to time the

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grant of the 2x Time Options relatively near in time to but before the earlier of (i) a
“Change in Control” or “Public Offering” as defined in the New Option Plan or (ii) the time at
which the Board in its good faith judgment, believes that it is likely that the fair market value
per share of HCA common stock will soon thereafter exceed the proposed exercise price of the 2x
Time Options, but not later than the fifth anniversary of the Closing Date. The form of the award
agreement for the 2x Time Options will otherwise be consistent with the terms of time-vesting
options that the Executive is granted in connection with the Closing. If an executive’s employment
is terminated, then any 2x Time Options which are forfeited (or 2x option shares which are
repurchased) would be re-issued to the other then-remaining Tier 1 Executives or the person who is
chosen to replace the forfeiting Tier 1 Executive.

               c. In connection with the foregoing, Executive hereby acknowledges his or her commitment to
invest in the Company or HCA as agreed to in that certain Management Investment Letter agreement
between the Executive and the Company, in an amount as described under the sub-heading “Equity Roll
Over Commitments” in HCA’s definitive proxy statement filed October 17, 2006.

     7. Termination. The Employment Term and Executive’s employment hereunder may be
terminated by either party at any time and for any reason; provided that Executive will be required
to give the Company at least 90 days advance written notice of any resignation of Executive’s
employment; provided, however, that the Company may elect to accelerate the effective date of such
resignation, and such acceleration shall not be deemed a termination of Executive’s employment
without Cause (as defined below) by the Company. Notwithstanding any other provision of this
Agreement, and subject to the provisions of the Equity Agreements, the provisions of this Section 7
shall exclusively govern Executive’s rights upon termination of employment with the Company and its
affiliates.

               a. By the Company For Cause or By Executive Without Good Reason.

          (i) The Employment Term and Executive’s employment hereunder may be terminated by the Company
for Cause (as defined below) and shall terminate automatically upon Executive’s voluntary
resignation without Good Reason (as defined below).

          (ii) For purposes of this Agreement, “Cause” shall mean Executive’s:

     (A) willful and continued failure to perform his or her material duties with
respect to the Company or it subsidiaries which continues beyond ten (10) business days
after a written demand for substantial performance is delivered to Executive by the
Company (the “Cure Period”); or

     (B) willful or intentional engaging by Executive in material misconduct that causes
material and demonstrable injury, monetarily or otherwise, to the Company, the Sponsor
Group (as defined in Section 8 below) or their respective affiliates; or

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     (C) conviction of, or a plea of nolo contendere to, a crime constituting (x) a
felony under the laws of the United States or any state thereof or (y) a misdemeanor for
which a sentence of more than six months’ imprisonment is imposed; or

     (D) willful and material breach of the Equity Agreements, or Executive’s engaging
in any action in breach of the covenants set forth in Section 8, which continues beyond
the Cure Period (to the extent that, in the Board’s reasonable judgment, such breach can
be cured).

For purposes of this Section 7(a)(ii), an action will not be considered “willful” unless
taken in bad faith or without the reasonable belief that it was in the best interest of
HCA.

          (iii) If Executive’s employment is terminated by the Company for Cause or if Executive
voluntarily resigns without Good Reason (other than due to Executive’s death or Disability (as
defined in Section 7(b) below)), Executive shall be entitled to receive:

     (A) any Base Salary earned, but unpaid, through the date of termination;

     (B) any Annual Bonus earned, but unpaid, as of the date of termination for the
immediately preceding Fiscal Year, paid in accordance with Section 4 (except to the
extent payment is otherwise deferred pursuant to any applicable deferred compensation
arrangement with HCA);

     (C) reimbursement, within 60 days following submission by Executive to the Company
and HCA of appropriate supporting documentation, for any unreimbursed business expenses
properly incurred by Executive in accordance with HCA policy prior to the date of
Executive’s termination; so long as claims for such reimbursement (accompanied by
appropriate supporting documentation) are submitted to the Company and HCA within 90
days following the date of Executive’s termination of employment; and

     (D) such Employee Benefits, if any, as to which Executive may be entitled under the
employee benefit plans of HCA, (the amounts described in clauses (A) through (D) hereof
being referred to as the “Accrued Rights”).

     Following such termination of Executive’s employment by the Company for Cause or voluntary
resignation by Executive without Good Reason (other than due to Executive’s death or Disability),
except as set forth in this Section 7(a)(iii) or the Equity Agreements, Executive shall have no
further rights to any compensation or any other benefits from the Company or any of its affiliates.

    
           b. Disability or Death.

          (i) The Employment Term and Executive’s employment hereunder shall terminate upon Executive’s
death and may be terminated by the Company if Executive becomes disabled (within the meaning of
Section 409A of the Internal Revenue Code (such incapacity is hereinafter referred to as
“Disability”)). Any question as to the existence of the Disability of

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Executive as to which Executive and the Company cannot agree shall be determined in writing by
a qualified independent physician mutually acceptable to Executive and the Company. If Executive
and the Company cannot agree as to a qualified independent physician, each shall appoint such a
physician and those two physicians shall select a third who shall make such determination in
writing. The determination of Disability made in writing to the Company and Executive shall be
final and conclusive for all purposes of this Agreement, and the Company shall bear the costs of
retaining the independent physician.

          (ii) Upon termination of Executive’s employment hereunder for either Disability or death,
Executive or Executive’s estate (as the case may be) shall be entitled to receive:

     (A) the Accrued Rights; and

     (B) a pro rata portion of the Annual Bonus, if any, that Executive would have been
entitled to receive pursuant to Section 4 hereof for the Fiscal Year in which such
termination occurs, based upon HCA’s actual results for the year of termination and the
percentage of the Fiscal Year that shall have elapsed through the date of Executive’s
termination of employment, payable to Executive pursuant to Section 4 had Executive’s
employment not terminated (a “Prorated Bonus”).

     Following Executive’s termination of employment due to death or Disability, except as set
forth in this Section 7(b)(ii) or the Equity Agreements, Executive shall have no further rights to
any compensation or any other benefits from the Company or any of its affiliates.

                c. By the Company Without Cause or By Executive Due to Voluntary Resignation for Good
Reason.

          (i) The Employment Term and Executive’s employment hereunder may be terminated by the Company
without Cause (other than by reason of Executive’s Disability) and shall terminate automatically
upon Executive’s voluntary resignation for Good Reason.

          (ii) For purposes of this Agreement, “Good Reason” shall mean:

     (A) (I) a reduction in Executive’s Base Salary (other than a general reduction in
Base Salary that affects all similarly situated employees (defined as all employees
within the same HCA pay grade as that of Executive) in substantially the same
proportions that the Board implements in good faith after consultation with the Chief
Executive Officer and Chief Operating Officer of HCA), or (II) a reduction in
Executive’s annual incentive compensation opportunity, or (III) the reduction of
benefits payable to Executive under HCA’s Supplemental Executive Retirement Plan, in
each case other than any isolated, insubstantial and inadvertent failure by the Company
or HCA that is not in bad faith and is cured within ten (10) business days after
Executive gives the Company written notice of such event; or

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     (B) a substantial diminution in Executive’s title, duties and responsibilities,
other than any isolated, insubstantial and inadvertent failure by the Company or HCA
that is not in bad faith and is cured within ten (10) business days after Executive
gives the Company written notice of such event; or

     (C) a transfer of Executive’s primary workplace to a location that is more than
twenty (20) miles from his or her workplace as of the date of this Agreement.

          (iii) If Executive’s employment is terminated by the Company without Cause (other than by
reason of Executive’s Disability), or if Executive voluntarily resigns with Good Reason, Executive
shall be entitled to receive:

     (A) the Accrued Rights;

     (B) subject to Executive’s execution and delivery of a general release of claims
against the Company and its affiliates in a form reasonably acceptable to the Company
and Executive’s continued compliance with the provisions of Sections 8 and 9, payment of
an amount equal to the product of (I) two times the sum of (II) Executive’s (x) then
Base Salary and (y) Annual Bonus paid or payable in respect of the Fiscal Year
immediately preceding the Fiscal Year in which such termination occurs, payable over a
two-year period (or such shorter period as may be required by applicable tax laws) (the
“Severance Period”);

     (C) a Prorated Bonus;

     (D) continued coverage under HCA’s group health plans during the Severance Period
on the same basis as such coverage was provided immediately prior to Executive’s
termination of employment; provided that, in order to facilitate such coverage,
the Executive, in accordance with HCA’s policies in effect at the time of Executive’s
termination, agrees to elect continuation coverage in accordance with the provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (the amounts
described in clauses (B), (C) and (D) hereof being referred to as the “Severance
Benefits”);

     (E) notwithstanding any provision to the contrary in the New Option, Executive’s
vested New Options will remain exercisable until the first anniversary of the
termination of Executive’s employment.

     Following Executive’s termination of employment by the Company without Cause (other than by
reason of Executive’s Disability) or voluntary resignation with Good Reason by Executive, Executive
shall be permitted to choose to have Executive’s covenants described in Section 8(a)(i) (as well as
any similar covenant in HCA’s shareholder’s agreement) waived in lieu of receiving the Severance
Benefits; and, except as set forth in this Section 7(c)(iii) or the Equity Agreements, Executive
shall have no further rights to any compensation or any other benefits from the Company or any of
its affiliates.

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          d. Notice of Termination. Any purported termination of employment by the Company or
by Executive (other than due to Executive’s death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 11(i) hereof. For purposes of
this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of employment under the
provision so indicated.

          e. Board/Committee Resignation. Upon termination of Executive’s employment for any
reason, Executive agrees to resign, as of the date of such termination and to the extent
applicable, from the Board (and any committees thereof) and the Board of Directors (and any
committees thereof) of any of the Company’s affiliates to which the Executive was appointed as a
result of Executive’s employment with the Company or was appointed at the direction of the Sponsor
Group.

     8. Non-Competition; Non-Solicitation.

          a. Executive acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its affiliates and, subject to the provisions of Section 7(c)(iii), accordingly
agrees as follows:

     (i) During the Employment Term and, for a period of twenty-four (24) months following
the date Executive ceases to be employed hereunder for any reason (the “Restricted Period”),
Executive will not directly or indirectly:

	 	(A)	 	engage in any business that competes with the
business of the Company or its affiliates (including businesses which
the Company or its affiliates have specific plans to conduct in the
future, as to which the Company or its affiliates have taken steps
towards commencing and as to which Executive has participated in such
planning) in any geographical area where the Company or its affiliates
manufactures, produces, sells, leases, rents, licenses or otherwise
provides its products or services (a “Competitive Business”);
	 
	 	(B)	 	enter the employ of, or render any services to, any Person (or any
division or controlled or controlling affiliate of any Person) who or which
engages in a Competitive Business;
	 
	 	(C)	 	acquire a financial interest in, or otherwise become actively involved
with, any Competitive Business, directly or indirectly, as an individual,
partner, shareholder, officer, director, principal, agent, trustee or
consultant; or
	 
	 	(D)	 	interfere with, or attempt to interfere with, business relationships
(whether formed before, on or after the date of this Agreement)

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between the Company or any of its affiliates and customers, clients, or
suppliers of the Company or its affiliates.

     (ii) Notwithstanding anything to the contrary in this Agreement, Executive may,
directly or indirectly own, solely as an investment, securities of any Person engaged in the
business of the Company or its affiliates which are publicly traded on a national or
regional stock exchange or quotation system or on the over-the-counter market if Executive
(x) is not a controlling person of, or a member of a group which controls, such person and
(y) does not, directly or indirectly, own 5% or more of any class of securities of such
Person.

     (iii) During the Restricted Period, Executive will not, whether on Executive’s own
behalf or on behalf of or in conjunction with any Person, directly or indirectly:

	 	(A)	 	solicit or encourage any employee of the Company or its affiliates to
leave the employment of the Company or its affiliates; or
	 
	 	(B)	 	hire any such employee who was employed by the
Company or its affiliates as of the date of Executive’s termination of
employment with the Company or who left the employment of the Company
or its affiliates coincident with, or within one year prior to, the
termination of Executive’s employment with the Company.

     (iv) During the Restricted Period, Executive will not, directly or indirectly, solicit
or encourage to cease to work with the Company or its affiliates any consultant then under
contract with the Company or its affiliates.

     (v) Notwithstanding the foregoing, the term “affiliates” as used in Section 8(a) will
not include any member of the Sponsor Group (as defined below) or their affiliates that are
not engaged in Competitive Business. For purposes of this Agreement, the term “Sponsor
Group” shall mean Bain Capital Partners LLC, Kohlberg Kravis Roberts & Co. L.P., and
Merrill Lynch Global Private Equity.

               b. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 8 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.

     9. Confidentiality.

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          a. Executive will not at any time (whether during or after Executive’s employment hereunder):
(i) retain or use for the benefit, purposes or account of Executive or any other Person; or (ii)
disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the
Company (other than its professional advisers who are bound by confidentiality obligations), any
non-public, proprietary or confidential information —including without limitation trade secrets,
know-how, research and development, software, databases, inventions, processes, formulae,
technology, designs and other intellectual property, information concerning finances, investments,
profits, pricing, costs, products, services, vendors, customers, clients, partners, investors,
personnel, compensation, recruiting, training, advertising, sales, marketing, promotions,
government and regulatory activities and approvals — concerning the past, current or future
business, activities and operations of the Company, its subsidiaries or affiliates and/or any third
party that has disclosed or provided any of same to the Company on a confidential basis
(“Confidential Information”) without the prior written authorization of the Board.

          b. “Confidential Information” shall not include any information that is (i) generally known to
the industry or the public other than as a result of Executive’s breach of this covenant or any
breach of other confidentiality obligations by third parties; (ii) made legitimately available to
Executive by a third party without breach of any confidentiality obligation; or (iii) required by
law to be disclosed; provided that Executive shall give prompt written notice to the
Company of such requirement, disclose no more information than is so required, and cooperate with
any attempts by the Company to obtain a protective order or similar treatment.

          c. Except as required by law, Executive will not disclose to anyone, other than Executive’s
immediate family and legal or financial advisors, the existence or contents of this Agreement;
provided that Executive may disclose to any prospective future employer the provisions of
Sections 8 and 9 of this Agreement provided they agree to maintain the confidentiality of such
terms.

          d. Upon termination of Executive’s employment hereunder, Executive shall (i) cease and not
thereafter commence use of any Confidential Information or intellectual property (including without
limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain
name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; (ii)
immediately destroy, delete, or return to the Company, at the Company’s option, all originals and
copies in any form or medium (including memoranda, books, papers, plans, computer files, letters
and other data) in Executive’s possession or control (including any of the foregoing stored or
located in Executive’s office, home, laptop or other computer, whether or not Company property)
that contain Confidential Information or otherwise relate to the business of the Company, its
affiliates and subsidiaries, except that Executive may retain only those portions of any personal
notes, notebooks and diaries (including Executive’s personal rolodex) that do not contain any
Confidential Information; and (iii) notify and fully cooperate with the Company regarding the
delivery or destruction of any other Confidential Information of which Executive is or becomes
aware.

     10. Specific Performance; Forfeiture of Certain Equity.

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          a. Executive acknowledges and agrees that the Company’s remedies at law for a breach or
threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and the
Company would suffer irreparable damages as a result of such breach or threatened breach. In
recognition of this fact, Executive agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company, without posting any bond, shall be
entitled to cease making any payments or providing any benefit otherwise required by this Agreement
and obtain equitable relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may then be available.

          b. In the event that the Executive breaches these covenants during the Restricted Period, in
addition to other remedies, the Company will be entitled to recover any payments made by the
Company to the Executive in respect of the repurchase of the Executive’s New Options and Option
Stock (except that, with respect to the Option Stock, such recovery will be limited to only the
amounts, if any, that the Executive received in excess of the exercise price paid by the Executive
in acquiring such Option Stock, on a net after-tax basis).

     11. Miscellaneous.

          a. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee, without regard to conflicts of laws principles thereof.

          b. Dispute Resolution. Except as otherwise provided in Section 10 of this Agreement,
any controversy, dispute, or claim arising out of, in connection with, or in relation to, the
interpretation, performance or breach of this Agreement, including, without limitation, the
validity, scope, and enforceability of this section, may at the election of any party, be solely
and finally settled by arbitration conducted in Nashville, Tennessee, by and in accordance with the
then existing rules for commercial arbitration of the American Arbitration Association, or any
successor organization and with the Expedited Procedures thereof (collectively, the
“Rules”). Each of the parties hereto agrees that such arbitration shall be conducted by a
single arbitrator selected in accordance with the Rules; provided that such arbitrator shall be
experienced in deciding cases concerning the matter which is the subject of the dispute. Any of
the parties may demand arbitration by written notice to the other and to the Arbitrator set forth
in this Section 11(b) (“Demand for Arbitration”). Each of the parties agrees that if
possible, the award shall be made in writing no more than 30 days following the end of the
proceeding. Any award rendered by the arbitrator(s) shall be final and binding and judgment may be
entered on it in any court of competent jurisdiction. Each of the parties hereto agrees to treat
as confidential the results of any arbitration (including, without limitation, any findings of fact
and/or law made by the arbitrator) and not to disclose such results to any unauthorized person.
The parties intend that this agreement to arbitrate be valid, enforceable and irrevocable. In the
event of any arbitration with regard to this Agreement, each party shall pay its own legal fees and
expenses, provided, however, that the parties agree to share the cost of the Arbitrator’s fees. If
Executive substantially prevails on any of his substantive legal claims, then the Company shall pay
all legal fees incurred by Executive to arbitrate the dispute, and all arbitration fees.

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          c. Entire Agreement/Amendments. This Agreement contains the entire understanding of
the parties with respect to the employment of Executive hereunder. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties hereto.

          d. No Waiver. The failure of a party to insist upon strict adherence to any term 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 that term or any other term
of this Agreement.

          e. Severability. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.

          f. Assignment. This Agreement, and all of Executive’s rights and duties hereunder,
shall not be assignable or delegable by Executive. Any purported assignment or delegation by
Executive in violation of the foregoing shall be null and void ab initio and of no force and
effect. This Agreement may be assigned by the Company to a person or entity which is (i) an
affiliate of the Company, so long as such affiliate maintains sufficient assets to satisfy the
Company’s obligation hereunder, (ii) a successor in interest to substantially all of the business
operations of the Company. Upon such assignment, the rights and obligations of the Company
hereunder shall become the rights and obligations of such successor person or entity.

          g. No Set Off; No Mitigation. The Company’s obligation to pay Executive the amounts
provided and to make the arrangements provided hereunder shall not be subject to set-off,
counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates.
Executive shall not be required to mitigate the amount of any payment provided for pursuant to this
Agreement by seeking other employment, taking into account the provisions of Section 8 of this
Agreement.

          h. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be
binding upon personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

          i. Notice. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or overnight courier or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the respective addresses
set forth below in this Agreement, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.

     If to Hercules Holding II, LLC, to:

12

 

Merrill Lynch Global Private Equity

Four World Financial Center, Floor 23

New York, NY 10080

Attention: George A. Bitar

Telecopy: (212) 449-1119

and

Bain Capital Partners, LLC

111 Huntington Avenue

Boston, MA 02199

Attention: Chris Gordon

Telecopy: (617) 516-2010

and

Kohlberg Kravis Roberts & Co. L.P.

2800 Sand Hill Road, Suite 200

Menlo Park, CA 94025

Attention: James C. Momtazee

Telecopy: (650) 233-6584

and

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attention: Andrea K. Wahlquist, Esq.

Telecopy: (212) 455-2502

If to HCA Inc., to

HCA Inc.

One Park Plaza

Nashville, TN 37203

Attn: General Counsel

Telecopy: (615) 344-1531

and copies to:

Merrill Lynch Global Private Equity

Four World Financial Center, Floor 23

New York, NY 10080

Attention: George A. Bitar

Telecopy: (212) 449-1119

13

 

and

Bain Capital Partners, LLC

111 Huntington Avenue

Boston, MA 02199

Attention: Chris Gordon

Telecopy: (617) 516-2010

and

Kohlberg Kravis Roberts & Co. L.P.

2800 Sand Hill Road, Suite 200

Menlo Park, CA 94025

Attention: James C. Momtazee

Telecopy: (650) 233-6584

and

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attention: Andrea K. Wahlquist, Esq.

Telecopy: (212) 455-2502

     If to Executive:

     To the Executive’s address of record on the books of the Company.

          j. Prior Agreements. This Agreement supercedes all prior agreements and
understandings (including verbal agreements) between Executive and the Company and/or its
affiliates regarding the terms and conditions of Executive’s employment with the Company and/or its
affiliates.

          k. Cooperation. Executive shall provide Executive’s reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or proceeding) which
relates to events occurring during Executive’s employment hereunder. The Company shall pay to
Executive reasonable fees, and reimburse Executive’s reasonable related business expenses incurred
by Executive in connection with Executive’s provision of such services. This provision shall
survive any termination of this Agreement.

          l. Withholding Taxes. The Company or HCA may withhold from any amounts payable under
this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to
any applicable law or regulation.

14

 

          m. Counterparts. This Agreement may be 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.

          n. Compliance with Section 409A. This Agreement is intended to comply with Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”) and will be so
interpreted. Notwithstanding anything herein to the contrary, (i) if at the time of Executive’s
termination of employment hereunder Executive is a “specified employee” as defined in Section 409A
of the Code, and the deferral of the commencement of any payments or benefits otherwise payable
hereunder as a result of such termination of employment is necessary in order to prevent the
imposition of any accelerated or additional tax under Section 409A of the Code, then the Company
will defer the commencement of the payment of any such payments or benefits hereunder (without any
reduction in such payments or benefits ultimately paid or provided to Executive) until the date
that is six months following Executive’s termination of employment with the Company (or the
earliest date as is permitted under Section 409A of the Code) and (ii) if any other payments of
money or other benefits due to Executive hereunder could cause the application of an accelerated or
additional tax under Section 409A of the Code, the parties agree to restructure the payments or
benefits to comply with Section 409A of the Code in a manner which does not diminish the value of
such payments and benefits to the Executive.

          o. Future Change in Control. The Company and the Executive agree to work together in
good faith to try to address any issues posed by Sections 280G and 4999 of the Code that could
arise as a result of a change in control of HCA (within the meaning of Section 280G of the Code)
that occurs after the Closing.

          p. Option Adjustment. The Company agrees to indemnify Executive against any adverse
tax consequences (including, without limitation, under Section 409A and 4999 of the Code), if any,
that result from the adjustment by the Company or HCA of stock options held by the Executive in
connection with the Merger or the payment of any extraordinary cash dividends after the Closing.
For the avoidance of doubt, this indemnity does not extend to tax consequences that arise upon the
“cash out” of Executive’s existing HCA stock options on the Closing (or otherwise upon the exercise
of Executive’s stock options).

[Remainder of Page Intentional Left Blank]

15

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year
first above written.

	 	 	 
	HERCULES HOLDING II, LLC	 	
WILLIAM P. RUTLEDGE
	/s/ Chris Gordon

 
	 	
/s/ William P. Rutledge

 

	By: Chris Gordon	 	 
	Title: President	 	 

16EX-10.1

 

EXHIBIT 10.1

KING PHARMACEUTICALS, INC.

INCENTIVE PLAN

OPTION CERTIFICATE

     This Certificate, when executed by a duly authorized officer of King Pharmaceuticals, Inc.
(the “Company”), 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.

	 	 	 	 	 
	 	KING PHARMACEUTICALS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

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

 

     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

 

     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

 

     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

 

“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:

6

 

	 	 	 
	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

 

     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.

     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

 

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):

     o to me; or

     o to me and _________, as joint tenants with right of
survivorship,

     at the following address:

     ________________________________

     ________________________________

     ________________________________

A-1

 

     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

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