Document:

EX-10.3 Warrant

 

EXHIBIT 10.3

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY SHARE MAY BE SOLD OR TRANSFERRED ABSENT SUCH
REGISTRATION OR AN EXEMPTION THEREFROM.

     Effective Date: October 19, 2007

WARRANT TO PURCHASE COMMON STOCK

LADENBURG THALMANN FINANCIAL SERVICES INC.

EXPIRING OCTOBER 19, 2017 (THE “EXPIRATION DATE”)

     THIS WARRANT CERTIFIES THAT Frost Gamma Investments Trust or their permitted assigns
(“Holder”), for good and valuable consideration, the receipt of which is hereby acknowledged, has
been granted the right to purchase from Ladenburg Thalmann Financial Services Inc., a Florida
corporation (the “Company”), at any time and from time to time, for a period commencing on the
Effective Date (as defined below) and ending on the Expiration Date, 2,000,000 (the “Warrant
Number”) validly issued, fully-paid and non-assessable shares (the “Shares”) of the Company’s
common stock, par value $.0001 per share, subject to adjustment as provided herein, at the exercise
price of $1.91 per share (the “Exercise Price”).

     1. Term of Warrant. Subject to the terms and conditions set forth herein, this Warrant shall
be exercisable, in whole or in part, during the term (“Term”) commencing at 9:00 a.m., New York,
New York time, on the date hereof (the “Effective Date”) and ending at 5:00 p.m., New York, New
York time on the Expiration Date, and shall be void thereafter.

     2. Exercise of Warrant.

     2.1. Manner of Exercise. The purchase rights represented by this Warrant are
exercisable by the Holder in whole or in part, at any time, or from time to time, during the Term,
by the surrender of this Warrant and the Notice of Exercise (in the form annexed hereto as Exhibit
A), duly completed and executed on behalf of the Holder, at the office of the Company (or such
other office or agency of the Company as it may designate by notice in writing to the Holder), upon
payment of the purchase price of the Shares to be purchased (i) in cash or wire transfer to an
account designated by the Company, (ii) by tender for cancellation of a portion of the Company’s
11% notes due 2012, (iii) by a Net Issue Election as provided for below or (iv) a combination of
the foregoing.

     2.2. Time of Exercise. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for exercise as provided
above (the “Exercise Date”), and the Person entitled to receive the Shares issuable upon such
exercise shall be treated for all purposes as the holder of record of such Shares as of the close
of business on such date. As used in this Warrant, “Person” shall mean an individual, corporation,
limited liability company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or any agency or political subdivision thereof) or other
entity of any kind.

     2.3. Delivery of Certificate and Revised Warrant. As promptly as practicable on or
after the Exercise Date and in any event within fifteen (15) days thereafter, the Company at its
expense, will issue and deliver to the Person(s) entitled to receive the same a certificate or
certificates for the number of Shares issuable upon such exercise or other appropriate written
evidence of the issuance of the Shares. In the event that this Warrant is exercised in part, the
Company at its expense shall execute and deliver a new Warrant of like tenor exercisable for the
number of Shares for which this Warrant may then be exercised at the same time.

     2.4. No Fractional Shares. No fractional Shares or scrip representing fractional
Shares shall be issued upon the exercise of this Warrant. In lieu of any fractional Share to which
the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise
Price multiplied by such fraction.

 

 

     2.5. Net Issue Exercise. Notwithstanding any provisions herein to the contrary, if
the fair market value of
one Share is greater than the Exercise Price, in lieu of exercising this Warrant for cash, the
Holder may elect to receive Shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise and notice of such election in which event
the Company shall issue to the Holder a number of Shares computed using the following formula:

	 	 	 	 	 
	X

	 	=
	 	Y (A-B)
	 

	 	 	 	A

     Where:

     X = the number of Shares to be issued to the Holder

     Y = the number of Shares purchasable under the Warrant or, if only a portion of the Warrant is
being exercised, the portion of the Warrant being canceled (at the date of such calculation)

     A = the fair market value of one Share (at the date of such calculation)

     B = Exercise Price

     For purposes of the above calculation, fair market value of one Share shall be determined in
good faith by the Board of Directors of the Company; provided, however, that where there exists a
public market for the Shares at the time of such exercise, the fair market value per Share shall be
the last reported sale price of the Common Stock or the closing price quoted on the American Stock
Exchange, the Nasdaq Stock Market, the OTC Bulletin Board or on any exchange or market on which the
Common Stock is listed, whichever is applicable, on the Exercise Date.

     3. Adjustments to the Shares.

     3.1. Merger, Sale of Assets, etc. If at any time while this Warrant, or any portion
thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a
combination, reclassification, exchange or subdivision of securities otherwise provided for
herein), (ii) a merger or consolidation of the Company with or into another entity in which the
Company is not the surviving entity, or a reverse triangular merger in which the Company is the
surviving entity but the Company’s shares of capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, or (iii) a sale or transfer of the Company’s properties and assets
as, or substantially as, an entirety to any other person, this Warrant shall thereafter represent
the right to acquire the number of Shares or other securities or property which the Holder of this
Warrant would have owned immediately after the consummation of such reorganization, merger,
consolidation, sale or transfer, if the Holder of this Warrant had exercised this Warrant
immediately before the effective date of the reorganization, merger, consolidation, sale or
transfer.

     3.2. Reclassification, etc. If the Company, at any time while this Warrant, or any
portion hereof, remains outstanding and unexpired by reclassification of securities or otherwise,
shall change any of the securities as to which purchase rights under this Warrant exist into the
same or a different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or other change and
the Warrant Number shall be appropriately adjusted, all subject to further adjustment as provided
for herein.

     3.3. Split, Subdivision or Combination of Shares. If the Company at any time while
this Warrant, or any portion hereof, remains outstanding and unexpired shall split, subdivide or
combine the securities as to which purchase rights under this Warrant exist, into a different
number of securities of the same class, the Warrant Number shall be proportionately increased (and
the Exercise Price decreased correspondingly) in the case of a split or subdivision or
proportionately decreased (and the Exercise Price increased correspondingly) in the case of a
combination.

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     3.4. Adjustments for Dividends in Shares or Other Securities or Property. If while
this Warrant, or any portion hereof, remains outstanding and unexpired, the holders of the
securities as to which purchase rights under this Warrant exist at the time shall have received,
or, on or after the record date fixed for the determination of eligible shareholders, shall have
become entitled to receive, without payment therefor, other or additional securities or property
(other than cash) of the Company by way of dividend, then and in each case, this Warrant shall
represent the right to acquire, in addition to the number of Shares receivable upon exercise of
this Warrant, and without payment of any additional consideration therefor, the amount of such
other or additional securities or property (other than cash) of the Company that such Holder would
hold on the date of such exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such Shares and/or all other additional
securities available to it as aforesaid during such period, giving effect to all adjustments called
for during such period by the provisions of this Warrant.

     4. Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment
pursuant to Section 3, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each Holder a certificate setting
forth, in reasonable detail, the event requiring the adjustment or readjustment, the amount of such
adjustment or readjustment, the method by which such adjustment or readjustment was calculated, the
Exercise Price, and the number of Shares and the amount, if any, of other property that at the time
would be received upon the exercise of the Warrant. The Company shall upon the written request, at
any time, of any such Holder, furnish or cause to be furnished to such Holder a like certificate.

     5. Share Legend. Each certificate for Shares issued upon exercise of this Warrant may bear
the following legend, unless at the time of exercise such Shares are registered under the
Securities Act:

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 UNLESS
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.

     6. Shares to be Fully Paid. The Company will issue Shares pursuant to this Warrant as fully
paid, non-assessable and free from all liens and encumbrances.

     7. Company to Reserve Shares. At all times before the date on which the Warrant expires (the
“Expiration Date”), the Company will reserve and keep available, free from preemptive rights, out
of its authorized but unissued Shares or Shares held in the treasury of the Company, for the
purpose of effecting the exercise of this Warrant, the full number of Shares then deliverable upon
the exercise of this Warrant. The issuance of this Warrant shall constitute full authority to those
officers of the Company who are charged with the duty of executing stock certificates to execute
and issue the necessary certificates for Shares upon exercise of this Warrant.

     8. Exchange of Warrant. The Holder may exchange this Warrant, at the Company’s expense, at
any time prior to the Expiration Date, by surrendering this Warrant to the Company, for other
warrant certificates, upon the same terms and conditions of this Warrant, which in the aggregate
entitle the Holders to purchase the balance of Shares then covered by this Warrant.

     9. No Rights as Stockholder. Except as otherwise provided herein, this Warrant will not
entitle the Holder to any of the rights of a stockholder of the Company, including, without
limitation, the right to vote or to receive distributions.

     10. Amendment. This Warrant may not be amended except with the prior written consent of the
Holder and the Company. Any instrument given by or on behalf of the Holder in connection with any
consent to any modification or amendment will be conclusive and binding on all subsequent holders
of this Warrant.

     11. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant or

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any stock certificate relating to the Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company issue or cause to be issued a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

     12. Transfer. The securities evidenced hereby have not been registered under the Securities
Act of 1933 or any state securities laws; such securities may not be transferred, sold, pledged, or
otherwise disposed of unless such securities are registered under the Securities Act of 1933 and
such state laws or such transactions are exempt from the registration requirements thereof. Upon
surrender of this Warrant as a result of a transfer hereof, the Company, at the expense of the
transferee or transferor hereof, as the transferee and transferor may decide between themselves,
will issue and deliver to, or to the order of, the transferee a new Warrant in the name of such
transferee, or as such transferee (on payment by such transferee of any applicable transfer taxes)
may direct, calling in the aggregate on the face thereof for the number of Shares called for on the
face of this Warrant. As a condition to effecting any transfer, the Holder shall notify the Company
of the proposed transfer by delivering a Notice of and Form of Assignment (in the form annexed
hereto as Exhibit B), duly completed and executed on behalf of the Holder at the office of the
Company (or such other office or agency of the Company as it may designate by notice in writing to
the Holder).

     13. Successors and Assigns. This Warrant shall not be assignable by the Company without the
prior written consent of the Holder and any such assignment in violation hereof shall be null and
void. Subject to the foregoing, this Warrant shall bind and inure to the benefit of the Company and
its permitted successors and assigns, the Holder and its successors and assigns.

     14. Applicable Law. This Warrant shall be construed in accordance with, and governed by, the
laws of the State of Florida without giving effect to the conflict of laws provisions thereof.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the
Effective Date set forth above.

	 	 	 	 	 
	 	LADENBURG THALMANN FINANCIAL SERVICES INC. 

 	 
	 	By:  	/s/ Richard J. Lampen
 	 
	 	 	Name:  	Richard J. Lampen       	 
	 	 	Title:  	President and CEO 	 
	 

-4-

 

EXHIBIT A

NOTICE OF EXERCISE

     Dated: ____________________________

     1. The undersigned hereby elects to purchase ____________________________ shares of
the common stock of Ladenburg Thalmann Financial Services Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such securities in full.
Such purchase price is being paid [insert whether by cash and/or cancellation of indebtedness].

     1. The undersigned hereby elects to convert the attached Warrant into shares of the common
stock of Ladenburg Thalmann Financial Services Inc. in the manner specified in Section 2.5 of the
Warrant. This conversion is exercised with respect to _____________________ of the
securities covered by the Warrant.

[Strike paragraph that does not apply.]

     2. Please issue certificate(s) representing said shares in the name of the undersigned or in
such other name(s) as is specified below and deliver such certificates to the address(es) specified
below:

[insert name(s) and address(es)]

     3. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name
of the undersigned or in such other name as is specified below:

[strike if not applicable]

	 	 	 	 	 
	 	[Insert name of Holder] 

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

EXHIBIT B

NOTICE OF AND

FORM OF ASSIGNMENT

(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)

     For
value received, the undersigned hereby sells, assigns, and transfer unto _______________, federal taxpayer identification number ____________, whose address is _______________, the right represented by the
within Warrant to purchase
_________ shares of common stock of Ladenburg Thalmann
Financial Services Inc. to which the within Warrant relates, and
appoints the Secretary of
_______________ Attorney to transfer such right on the books of _______________ with full power of substitution in the premises.

	 	 	 
	 
	 	 
	Dated:
	 	 
	 

	 	 
	 

	 	(Signature must conform to name of holder as

specified on the face of the Warrant)
	 
	 	 
	Signed in the presence of:
	 	 
	 

	 	 
	 

	 	AddressEx-10.1

 

Exhibit 10.1

AMENDED AND RESTATED

KING PHARMACEUTICALS, INC.

SEVERANCE PAY PLAN: TIER I

As Amended and Restated

Effective October 16, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	Section 1.
	 	Purpose Of The Plan
	 	 	1	 
	Section 2.
	 	Eligible Executives
	 	 	1	 
	Section 3.
	 	Definitions
	 	 	1	 
	Section 4.
	 	Severance Pay, Severance Benefits and Suspended Equity Awards
	 	 	7	 
	Section 5.
	 	Payment of Severance Pay,Severance Benefits and Suspended Equity Awards
	 	 	9	 
	Section 6.
	 	Section 409A
	 	 	10	 
	Section 7.
	 	Application Of Code Sections 280G and 4999
	 	 	11	 
	Section 8.
	 	Waiver, Release and Non-Solicitation, Noncompete and Nondisclosure Agreement
	 	 	11	 
	Section 9.
	 	Non-Solicitation, Non-Compete and Nondisclosure of Confidential Information
	 	 	12	 
	Section 10.
	 	Plan Administration
	 	 	13	 
	Section 11.
	 	Claims Procedure
	 	 	14	 
	Section 12.
	 	No Assignment
	 	 	15	 
	Section 13.
	 	No Employment Rights
	 	 	15	 
	Section 14.
	 	Plan Funding
	 	 	15	 
	Section 15.
	 	Survival of Plan Upon a Change in Control
	 	 	15	 
	Section 16.
	 	Applicable Law
	 	 	16	 
	Section 17.
	 	Severability
	 	 	16	 
	Section 18.
	 	Waivers
	 	 	16	 
	Section 19.
	 	Plan Year
	 	 	16	 
	Section 20.
	 	Amendment/Termination of Plan
	 	 	16	 
	Section 21.
	 	Recovery of Payments Made by Mistake
	 	 	17	 

i

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	Section 22.	 	Representations
Contrary to the Plan
	 	 	17	 
	Section 23.	 	Intellectual
Property
	 	 	17	 
	Section 24.	 	Cooperation
	 	 	18	 
	Section 25.	 	Miscellaneous
Provisions
	 	 	18	 

ii

 

KING PHARMACEUTICALS, INC.

AMENDED AND RESTATED SEVERANCE PAY PLAN: TIER I

Effective as of March 15, 2005, King Pharmaceuticals, Inc. (sometimes hereinafter referred to as
the “Company”) established the King Pharmaceuticals, Inc. Severance Pay Plan: Tier I (hereinafter
the “Plan”), for the benefit of the Company’s eligible executives as described herein. This
Amended and Restated Plan is adopted effective October 16, 2007. The Plan is a “top hat” plan
maintained for a select group of management or highly compensated employees within the meaning of
Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. The Plan is not intended to qualify under Code
section 401(a).

The Plan supersedes any Company severance plans, programs, policies or course of dealing covering
eligible executives, both formal and informal.

     Section 1. Purpose of the Plan

     The purpose of the Plan is to ensure that all eligible executives are given assurances,
conditioned as set forth herein, as to severance pay and severance benefits, both to allow them to
maintain their focus on making decisions that are in the best overall interests of the Company and
the resulting successor organization in the event that a Change in Control (as defined below) takes
place, and to alleviate concerns about job security absent a Change In Control.

     Section 2. Eligible Executives

     The Plan is applicable to those executives of the Company, consisting of the Chief Executive
Officer, those persons other than the Chief Executive Officer who the Company has determined to be
“executive officers” for purposes of Section 16 of the Exchange Act (“Key Executive Officers”), and
each Executive Vice President (collectively referred to as “Eligible Executives”) whose employment
is terminated due to a Qualifying Separation.

     Section 3. Definitions

     (a) “Affiliate” shall mean any domestic corporation or other domestic business entity which is
part of a continuous chain of ownership with the Company as the ultimate parent organization,
provided that the stock or equivalent ownership interest at each level from the Company to the
Affiliate is not less than fifty percent (50%) of either the total combined voting power of all
classes of stock or other interest entitled to vote or the value of all classes of ownership in the
entity at issue, taking into account at each level any options on ownership interests as
outstanding ownership interests.

     (b) “Bonus” shall mean a payment made to Eligible Executives pursuant to the terms of an
incentive plan established by the Company. Such a plan shall be referred to as a “Bonus Plan”.

     (c) “Buyer” shall mean a third party (that is, a person or entity that is not an Affiliate of
the Company) that is, directly or indirectly, the acquirer of, result of, or successor to any
Company business operations involved in a Segment Change in Control.

 

 

     (d) “Cause” shall mean and be limited to the following:

     (i) conviction of or pleading guilty or nolo contendere to an act of fraud,
embezzlement, theft or any other act constituting a felony or any crime involving moral
turpitude and/or dishonesty;

     (ii) gross negligence or willful misconduct which results or, in the sole opinion of
the Plan Administrator would be likely to result, in material harm to the Company or which
results or, in the sole opinion of the Plan Administrator would be likely to result, in a
materially adverse effect on the Company’s reputation, operations, properties, or business
or employee relationships;

     (iii) by action or inaction, failing or refusing faithfully and conscientiously to
perform one or more material assignments or responsibilities of the Executive’s position;

     (iv) failing or refusing to look after the best interests of the Company committed to
the Executive’s care;

     (v) failing or refusing reasonably to advance the interests of the Company;

     (vi) failing to devote full time, attention and energy to the business of the Company;
or

     (vii) failing to devote best efforts to the business of the Company.

     (e) “Change in Control” of the Company shall mean:

     (i) the sale of substantially all of the assets of the Company; or

     (ii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Management Shareholders, is or becomes the “beneficial owner”
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act except that a Person shall be
deemed to have “beneficial ownership” of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than thirty five percent (35%) of the total voting stock of
the Company;

     (iii) the Company consolidates with, or merges with or into, another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into, the Company,
in any such event pursuant to a transaction in which any voting stock of the Company is
reclassified or changed into or exchanged for cash, securities or other property, other than
any such transaction where (i) any voting stock of the Company is reclassified or changed
into or exchanged for nonredeemable voting stock of the surviving or transferee corporation
and (ii) immediately after such transaction no “person” or “group” (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act), other than the Management Shareholders, is
the “beneficial owner” (as defined in

2

 

Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have “beneficial ownership” of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of time), directly
or indirectly, of more than thirty five percent (35%) of the total voting stock of the
surviving or transferee corporation; or

     (iv) A majority of members of the corporation’s board of directors is replaced during
any 12-month period by directors whose appointment or election is not endorsed by a majority
of the members of the corporation’s board of directors prior to the date of the appointment
or election.

          A “Change in Control” shall be deemed to have occurred and be effective as of the closing date
of any transaction resulting in a Change in Control as hereinabove defined.

     (f) “Claim” shall mean any request for Severance Pay and/or Suspended Equity Awards under the
Plan. For Severance Benefits provided under the King Pharmaceuticals Medical, Dental and Vision
Care Plan, or any successor thereto, the term Claim and the claims procedure shall be determined
and administered under the terms of such plan.

     (g) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

     (h) “Compensation Committee” shall mean the Compensation and Human Resources Committee of the
Board of Directors of the Company.

     (i) “Confidential Information” shall mean, but shall not be limited to, any technical or
non-technical data, formulae, patterns, compilations, programs, devices, methods, techniques,
drawings, designs, processes, procedures, improvements, models, manuals, financial data, business
information and files, lists of actual or potential customers of the Company, employee information
and files, and any other information regarding the Company’s business plans, which are not
generally known to the public through legitimate origins. The Eligible Executive acknowledges and
agrees that such Confidential Information is extremely valuable to the Company. For purposes of
this Section, such information is “not generally known to the public through legitimate origins” if
it is not generally known to third parties who can obtain economic value from its disclosure and
use and is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy or confidentiality. In the event that any part of the Confidential Information becomes
generally known to the public through legitimate origins (other than by the breach of this
provision by the Executive or by misappropriation), that part of the Confidential Information shall
no longer be deemed Confidential Information for purposes of this Plan, but the Eligible Executive
shall continue to be subject to the terms of this provision as to all other Confidential
Information.

     (j) “Disability” shall mean (i) the Eligible Executive’s inability, by reason of any medically
determinable physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months, to engage in any
substantial gainful activity, or (ii) as a result of any medically determinable physical or

3

 

mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months the Eligible Executive has received income
replacement benefits for a period of not less than three (3) months under an accident and health
plan of the Company for its employees.

     (k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.

     (l) “Good Reason” shall mean any one or more of the following:

     (i) Implementation of a material diminution in the nature or status of the Eligible
Executive’s authority, duties, responsibilities, reporting relationships, title and/or
position; (provided, however, that a reduction in the number of employees reporting to an
Eligible Executive shall not, by itself, constitute Good Reason). Such material diminution
shall be determined, in the case of a Change in Control only, with reference to those in
effect as of thirty (30) days prior to the Change in Control, determined in the context of
the individual’s relative position in the overall controlled group of corporations which
includes the Company immediately prior to a Change in Control as compared to the
individual’s position in the overall controlled group of corporations which includes the
Company immediately after a Change in Control;

     (ii) Failure to pay promptly any material compensation when due;

     (iii) Material reduction in the rate of annual base salary without the Executive’s
consent;

     (iv) Material breach by the Company of any employment contract or other agreement as to
the terms and conditions of employment; or

     (v) An Eligible Executive’s Required Relocation.

     In order to effect a Separation from Service for Good Reason, the Eligible Executive must
provide Notice to the Company of the existence of one of the conditions that constitutes Good
Reason within thirty (30) days of the date the Eligible Executive first learns of the existence of
such condition. The Company shall have thirty (30) days (the “Cure Period”) from its receipt of
the Eligible Executive’s Notice of Good Reason to remedy the condition. If the Company fails to
remedy the condition during the Cure Period, then the Eligible Executive may effect a Separation
from Service for Good Reason from the Company. The right to effect a Separation from Service for
Good Reason must be exercised by the Eligible Executive within thirty (30) days after the
expiration of the Cure Period, otherwise the right to a Separation from Service on the basis of
that condition shall be deemed to have been waived. In the event that an Eligible Executive
provides a Notice of Separation from Service for Good Reason based upon a Required Relocation, the
Eligible Executive shall not be required to relocate until such time he/she waives his/her rights
under this Agreement related to the Required Relocation or he/she has a Separation from Service.

4

 

     The Eligible Executive’s right to effect a Separation from Service for Good Reason shall not
be affected by the Eligible Executive’s temporary incapacity due to a physical or
mental/psychological condition. However, a Disability as herein defined will not qualify as Good
Reason unless accompanied by one or more conditions that constitute Good Reason hereinabove listed.
A termination by the Eligible Executive for Good Reason shall not be considered to be a voluntary
resignation.

     (m) “Management Shareholder” shall mean a Person designated as an Executive Officer of the
Company pursuant to the rules and regulations of the Exchange Act.

     (n) “Notice” shall mean any notice required under the Plan, which notice shall be in writing.
Notice hereunder shall be deemed to have been given when delivered in person to the Company or
Eligible Executive; or actually received by the Company or Eligible Executive after being
transmitted by telefacsimile (“fax”) to the Company or Eligible Executive; or, deposited in the
United States mail, certified or registered, postage prepaid, return receipt requested, addressed
to the Company or Eligible Executive at their respective last known principal business address, and
thereafter actually received by the Company or Eligible Executive. The burden to prove timely
delivery to and receipt by the other party shall be on the party giving notice. The address for
Notice to the Company shall be:

Plan Administrator, Severance Pay Plan, Tier I

Human Resources Department

King Pharmaceuticals, Inc.

501 Fifth Street

Bristol, Tennessee 37620

Fax no:

     (o) “Person” shall mean any individual, corporation, partnership, association, joint-stock
company, trust, unincorporated organization, or a government or political subdivision thereof.

     (p) “Plan Administrator” shall mean (i) for those matters requiring Compensation Committee
approval, the Compensation Committee, and (ii) for all other matters, the Executive Vice President
of Human Resources.

     (q) “Qualified Employment” shall, with respect to any Eligible Executive, mean an employment
offer by a Buyer of any Company business operations involved in a Segment Change in Control,
pursuant to an agreement between Buyer and Company that contemplates such employment offer under
terms that would provide the Eligible Executive with: (i) an annual base salary of not less than
that in effect with the Company thirty (30) days prior to the reaching of an agreement to enter
into the Segment Change in Control; (ii) a level of authorities, duties and responsibilities not
materially diminished from those with the Company as of the date thirty (30) days prior to the
reaching of an agreement to enter into the Segment Change in Control; (iii) an aggregate level of
benefits and perquisites not materially less than the aggregate level provided by the Company as of
the date thirty (30) days prior the Segment Change in Control; and (iv) for a period of at least
twenty-four (24) months after the effective date of the Segment

5

 

Change in Control, the Buyer assumes the severance pay and welfare benefit continuation
aspects of this Plan or provides another plan or program providing substantially similar benefits
under substantially similar circumstance to those as would result from such assumption for such
period. An employment offer that requires the Eligible Executive to relocate on the start of
employment to a work site in excess of fifty (50) miles from the current work site of the Eligible
Executive’s principal job office or location shall not be an offer of Qualified Employment.

     (r) “Qualifying Separation” shall mean the Eligible Executive’s Separation from Service with
the Company: (A) within twenty-four (24) months following the date on which a Change in Control
occurs, either (i) for Good Reason, or (ii) initiated by the Company or its successor without
Cause; or (B) not following a Change in Control, whether (i) for Good Reason or (ii) initiated by
the Company without Cause.

     A Qualifying Separation shall not include a Separation from Service: (i) initiated by
the Company by reason of Cause, (ii) initiated by the Eligible Executive’s voluntary resignation,
retirement, death or Disability, (iii) preceding or following the Eligible Executive’s failure or
refusal to accept Qualified Employment, or (iv) preceding or following the Eligible Executive’s
acceptance of Qualified Employment.

     (s) “Required Relocation” shall mean the Company’s requirement that an Eligible Executive
relocate to a work site in excess of fifty (50) miles from the current work site of the Eligible
Executive’s principal job location or office.

     (t) “Release” shall mean a Waiver, Release and Non-Solicitation, Noncompete and Nondisclosure
Agreement, as described under Section 8 of the Plan, in a form substantially the same as that
attached as Exhibit 1 to this Plan.

     (u) “Segment Change in Control” shall mean a sale or transfer of a subsidiary, division,
plant, or other identifiable group of assets in a transaction or series of transactions outside of
the Company’s ordinary course of business. A sale of the Company or of all or substantially all of
the Company’s assets shall not constitute a Segment Change in Control.

     (v) “Separation from Service” shall mean an Eligible Executive’s cessation of services to the
Company and/or its affiliates. For purposes of this Plan, an Eligible Executive is treated as
continuing in employment with the Company while the Eligible Executive is on military leave, sick
leave, or other bona fide leave of absence if the period of such leave does not exceed six (6)
months, or if longer, so long as the Eligible Executive retains a right to reemployment with the
Company under an applicable statute or by contract. A leave of absence shall constitute a bona
fide leave of absence only if there is a reasonable expectation that the Eligible Executive will
return to perform services for the Company following such leave. If the period of leave exceeds
six (6) months and the Eligible Executive does not retain a right to reemployment under an
applicable statute or by contract, the Eligible Executive will be deemed to have a Separation from
Service on the first date immediately following such six (6) month period. Notwithstanding the
foregoing, if (i) a leave of absence is due to any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than six (6) months and (ii) such impairment

6

 

causes the Eligible Executive to be unable to perform the duties of his or her position of
employment or any substantially similar position of employment, then a twenty-nine (29) month
period of absence shall be substituted for the six (6) month period described above. For purposes
of this Plan, an Eligible Executive shall be deemed to have experienced a Separation from Service
on any date the Eligible Executive’s level of bona fide services performed for the Company
decreases to a level that is less than fifty percent (50%) of the average level of services
rendered by the Eligible Executive during the thirty-six (36) month period ending on such date or
the full period of services rendered by the Eligible Executive for the Company if the Eligible
Executive has been providing services to the Company for less than thirty-six (36) months as of
such date.

     (w) “Severance Benefits” shall mean continued coverage under the welfare benefits listed on
Exhibit 2 for which the Eligible Executive was eligible and participating on the date of the
Qualifying Separation, in each such case in accordance with the terms of the relevant plan(s) as
such plans may be amended from time to time.

     (x) “Severance Pay” shall mean the payments made to an Eligible Executive as provided in
Section 4(a) of the Plan.

     (y) “Stretch Bonus” shall mean the highest Bonus possible for employees of the Company at the
Eligible Executive’s level.

     (z) “Suspended Equity Awards” shall mean those equity awards established on behalf of an
Eligible Executive, to the extent the vesting of such equity awards is delayed as provided in
Section 4(c) of the Plan.

     (aa) “Target Bonus” shall mean the mid-range Bonus established for employees of the Company at
the Eligible Executive’s level.

     (bb) “Total Payment” shall mean total payments regarding the application of Code Sections 280G
and 4999 as described in Section 7 of the Plan.

     Section 4. Severance Pay, Severance Benefits and Suspended Equity Awards

     In the event that (i) an Eligible Executive’s employment is terminated as a result of a
Qualifying Separation, and (ii) the Eligible Executive provides the Company with an enforceable
Release in accordance with Section 8 of the Plan which is acceptable to the Company in its sole
discretion, the Company shall pay to the Eligible Executive and provide the Eligible Executive the
following Severance Pay, Severance Benefits, and/or Suspended Equity Awards:

     (a) Severance Pay

     The Eligible Executive shall be eligible to receive Severance Pay in an amount determined
under the following applicable schedule, based upon the job title of the individual at the time of
a Qualifying Separation:

7

 

     (i) In the case of a Qualifying Separation occurring within twenty-four (24) months
following the date on which a Change in Control occurs:

     (1) Chief Executive Officer: Three (3) times the sum of the current rate of
annual salary plus an amount equal to the Target Bonus for the current year.

     (2) Key Executive Officers and Executive Vice Presidents: Two (2) times the sum
of the current rate of annual salary plus an amount equal to the Target Bonus for
the current year.

     (ii) In the case of a Qualifying Separation that precedes a Change in Control, or
occurs more than twenty-four (24) months after a Change in Control:

     (1) Chief Executive Officer: Two (2) times the sum of the current rate of
annual salary plus an amount equal to the Target Bonus for the current year.

     (2) Key Executive Officers and Executive Vice Presidents: One and one-half
(1.5) times the sum of the current rate of annual salary plus an amount equal to the
Target Bonus for the current year.

     Target Bonus amounts for the current year will not be reduced by pro-ration based upon the
date of Separation from Service, but rather will be considered and included in full as part of the
Severance Pay to which Eligible Executives are entitled. The Plan Administrator may, in its sole
discretion, increase the amount of Severance Pay which shall be paid to an Eligible Executive by
increasing the portion of Severance Pay based on the Target Bonus up to the Stretch Bonus level.

     An Eligible Executive’s eligibility for a Bonus for the year in which a Qualifying Separation
occurs or for any prior years shall be governed solely by the terms of the Bonus Plan applicable to
such Eligible Executive. Nothing in this Plan shall be construed as entitling the Eligible
Executive to a Bonus that has not otherwise been earned under the terms of the Bonus Plan.

     In any case where a Qualifying Separation occurs during a fiscal year prior to or without
establishment of criteria for a Target Bonus for that fiscal year, Severance Pay shall be computed
based upon the Target Bonus last established for employees of the Eligible Executive’s level at the
time of the Qualifying Separation, unless the annual Bonus Plan has been abolished by the
Compensation Committee.

     An Eligible Executive’s Severance Pay shall be increased by an amount equal to the number of
earned and unused vacation days (based upon the Eligible Executive’s base salary as of the date of
the Qualifying Separation).

     (b) Severance Benefits

8

 

     In the event of a Qualifying Separation, an Eligible Executive shall be eligible to receive
Severance Benefits. Such Severance Benefits shall be provided at the Company’s expense under the
welfare benefit plan of the Company or Affiliate, as applicable, with coverage under the same terms
and conditions (exclusive of any tax consequences to the recipient(s) on resulting coverage or
benefits) as if he/she were still an active employee of the Company, including dependent coverage
where applicable. Such Severance Benefits coverage shall end on the earliest of (A) eighteen (18)
months beginning on the date of the Qualifying Separation, (B) the period for which Severance Pay
is calculated, as set forth in paragraph (a) above (i.e., three years for a Chief Executive Officer
if benefits are determined under Section 4(a)(i)(1)), (C) the date of any material breach of the
provisions of this Plan by the Eligible Executive, or (D) the date the Eligible Executive first
becomes eligible for coverage of the same general category under another plan, program or other
arrangement of any type or description, without regard to whether the Eligible Executive neglects,
refuses or otherwise fails to take any action required for enrollment in such other plan, program
or other arrangement. The Eligible Executive shall notify the Company in writing within seven (7)
days after becoming eligible for any such alternate coverage. At the end of such period of
continued coverage, such Eligible Executive shall be eligible to elect to continue
Company-sponsored medical coverage under COBRA, as defined in Code Section 4980B.

     (c) Suspended Equity Awards

     To the extent consistent with the existing terms of any equity-based incentive plan
or program of the Company (and in the case of any inconsistency, the terms of the equity-based
incentive plan or program shall control) , in the event of a Qualifying Separation any award
granted to an affected Eligible Executive pursuant to such equity-based plan which is not then
vested and exercisable shall not lapse, but shall instead be suspended (the “Suspended Equity
Award(s)”). Pending the timely execution of a Release by the Eligible Executive, no Suspended
Equity Award shall vest or become exercisable. Upon the timely execution of a Release by an
Eligible Executive for whom a Suspended Equity Award is so established, all rights of such Eligible
Executive under each Suspended Equity Award shall vest and thereafter become exercisable for the
remainder of the exercise period, if any, which would have existed under the terms of the Suspended
Equity Award (as set forth in the agreements, notices and plans governing the grant of such
Suspended Equity Award), as if such award had been vested on the date of the Qualifying Separation.
In the event of a failure by an Eligible Executive for whom a Suspended Equity Award is so
established to timely execute a Release (or upon such Eligible Executive’s subsequent revocation of
such Release), all suspended rights of such Eligible Executive under each Suspended Equity Award
shall lapse as of the date of the Qualifying Separation. To the extent not inconsistent with the
underlying equity-based plan, each Suspended Equity Award is deemed amended accordingly.

     Section 5. Payment of Severance Pay and Severance Benefits

     Severance Pay shall be paid in a lump sum following the Eligible Executive’s Qualifying
Separation; provided, however, that if the Plan Administrator elects, in its sole discretion, to
increase the Severance Pay or potential for Severance Pay under Section 4(a) above, such increase
or potential increase amount shall be paid to the Eligible Executive between January 1

9

 

and March 15 of the year following the year in which the Qualifying Separation occurred (with
such payment date being determined by the Plan Administrator in its sole discretion). Severance
Benefits shall be provided in accordance with Section 4(b) of the Plan following the Eligible
Executive’s Qualifying Separation. Suspended Equity Awards shall become vested and exercisable in
accordance with Section 4(c) of the Plan following the Eligible Executive’s Qualifying Separation.
No Severance Pay, Severance Benefits and/or Suspended Equity Awards shall be payable or available
until after the seven (7) day revocation period (as described in Section 8 of the Plan) for a
signed Release has expired. Upon the expiration of the seven (7) day revocation period, payment of
Severance Pay, Severance Benefits and/or Suspended Equity Awards shall be made (or begin to be
reimbursed) within thirty (30) days of such expiration, with the payment date being determined by
the Plan Administrator in its sole discretion. Notwithstanding the foregoing, if a Qualifying
Separation occurs after November 1 of any year, then payment of Severance Pay, Severance Benefits
and/or Suspended Equity Awards shall be made (or begin to be reimbursed) between January 1 and
March 15 of the year following the year in which the Qualifying Separation occurred (with such
payment date being determined by the Plan Administrator in its sole discretion). All taxes and
other deductions required by law, and any additional sums owing to the Company shall be deducted
from any Severance Pay, Severance Benefits and/or Suspended Equity Awards as determined by the
Company in its sole discretion. Any benefit that accrues under this Plan, if any, is net of any
such amount other than taxes and other deductions required by law.

     Section 6. Section 409A 

     It is intended that (i) each payment or installment of payments provided under this Plan is a
separate “payment” for purposes of Code Section 409A and (ii) that the payments satisfy, to the
greatest extent possible, the exemptions from the application of Code Section 409A, including those
provided under Treasury Regulations 1.409A-1(b)(4) (regarding short-term deferrals),
1.409A-1(b)(9)(iii) (regarding the two-times, two year exception), and 1.409A-1(b)(9)(v) (regarding
reimbursements and other separation pay). Notwithstanding anything to the contrary in this Plan,
if the Company determines (i) that on the date of an Eligible Executive’s Separation from Service
or at such other time that the Company determines to be relevant, the Eligible Executive is a
“specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)(1)) of the
Company and (ii) that any payments to be provided to the Eligible Executive pursuant to this Plan
are or may become subject to the additional tax under Code Section 409A(a)(1)(B) or any other taxes
or penalties imposed under Code Section 409A (“Section 409A Taxes”) if provided at the time
otherwise required under this Plan, then (A) such payments shall be delayed until the date that is
six (6) months after the date of the Eligible Executive’s Separation from Service with the Company,
or such shorter period that, as determined by the Company, is sufficient to avoid the imposition of
Section 409A Taxes (the “Payment Delay Period”) and (B) such payments shall be increased by an
amount equal to the interest on such payments for the Payment Delay Period at a rate equal to the
prime rate in effect as of the date the payment was first due (for this purpose, the prime rate
will be based on the rate published from time to time in The Wall Street Journal). Any payments
delayed pursuant to this Section 6 shall be made in a lump sum on the first day of the seventh
month following the Eligible Executive’s Separation from Service, or such earlier date that, as
determined by the Company, is sufficient to avoid the imposition of any Section 409A Taxes.

10

 

     Section 7. Application of Code Sections 280G and 4999

     If any portion of the Severance Pay, Severance Benefits, Suspended Equity Awards or any other
payment under this Plan or under any other agreement with, or plan of, the Company which is paid to
an Eligible Executive (in the aggregate “Total Payments”) would constitute an “excess parachute
payment” under Code Section 280G, then (i) the payments to be made to the Eligible Executive under
this Plan shall not be reduced as a result, and (ii) the payment of benefits due under the Plan to
the Eligible Executive shall be recomputed to a “grossed up” level sufficient to enable the
Eligible Executive to pay any resulting excise taxes and income taxes (including state, local, or
other taxes) on the grossed up portion of the Total Payment. Any such gross-up payment shall be
paid in a single sum payment at a time which will enable timely payment of any excise tax due by
the Eligible Executive, but in no event later than December 31 of the year following the year (A)
any excise tax is paid to the Internal Revenue Service regarding this Section 7 or (B) any tax
audit or litigation brought by the Internal Revenue Service or other relevant taxing authority
related to this Section 7 is completed or resolved.

     Section 8. Waiver, Release and Non-Solicitation, Noncompete and Nondisclosure
Agreement

     In order to receive the Severance Pay, Severance Benefits and/or Suspended Equity Awards
available under the Plan, an Eligible Executive must execute and deliver a signed, enforceable
Release to the Plan Administrator within forty-five (45) days of the date such Release is provided
to the Eligible Executive. Notwithstanding the prior sentence, (i) in the event of the death of
the Eligible Executive, a duly executed Release signed by the Eligible Executive within the forty
five (45) day normal execution period following a Qualifying Separation which is delivered to the
Company by the Eligible Executive’s representative within one hundred eighty (180) days following
the date of the Eligible Executive’s death will be treated as having been delivered to the Company
within such forty five (45) day period, (ii) in the event an Eligible Executive duly executes the
required Release within the normal forty five (45) day execution period following a Qualifying
Separation, and then prior to delivery the Eligible Executive incurs a Disability which, in the
sole opinion of the Plan Administrator, renders the Eligible Executive incapable of delivering such
Release to the Company within such forty five (45) day period, then delivery to the Company of such
signed Release within one hundred eighty (180) days following the date of the Eligible Executive’s
Disability will be treated as having been delivered to the Company within such forty five (45) day
period. In the event of the death or Disability of the Eligible Executive during the forty-five
(45) day period, prior to the Eligible Executive’s execution of the Release, the Plan Administrator
shall accept a Release executed and delivered by the Eligible Executive’s duly authorized personal
representative within one hundred eighty (180) days following the date of the Eligible Executive’s
death or Disability, as if the Eligible Executive had delivered such release to the Company within
the forty-five (45) day period.

     An Eligible Executive may revoke his/her signed Release within seven (7) days of his/her
signing such Release, provided such revocation is made in accordance with the provisions for
revocation set forth below. Any such revocation must be made in writing and must be received

11

 

by the Plan Administrator within such seven (7) day period. An Eligible Executive who timely
revokes his/her Release shall not be eligible to receive any Severance Pay, Severance Benefits
and/or Suspended Equity Awards under the Plan. An Eligible Executive who timely submits a signed,
Release and who does not exercise his/her right of revocation shall be eligible to receive
Severance Pay, Severance Benefits and/or Suspended Equity Awards under the Plan. Eligible
Executives are encouraged to contact their personal attorney at their own expense to review the
Release if they so desire. An Eligible Executive’s acceptance and right to retention of Severance
Pay, Severance Benefits and/or Suspended Equity Awards are contingent upon the terms of the Plan
and full compliance with the terms of the Release, including but not limited to the provisions of
paragraph 5 of such Release.

     Section 9. Non-Solicitation, Non-Compete and Nondisclosure of Confidential
Information

     (a) Non-Solicitation and Covenant Not to Compete. Over the period for which Severance Pay is
calculated under Section 4(a), Eligible Executive covenants that Eligible Executive will not,
without the prior joint written consent of the Compensation Committee and the Chief Executive
Officer of the Company:

     (i) Accept any employment, whether as an owner, partner, director, officer, employee,
agent, independent contractor, consultant, or in any other capacity, with any Person the
business of which directly competes with any of the Company’s or its subsidiaries’ or
Affiliates’ material products in development or production as of the date of the Qualifying
Separation, in any geographic area in which the Company markets its products.

     (ii) Solicit or attempt to solicit, directly or indirectly and in any capacity, any
customer or distributor with whom Eligible Executive had contact during the term of his or
her employment with the Company; or

     (iii) Solicit or attempt to solicit any employee of the Company or any of its
divisions, subsidiaries or affiliates to terminate his or her employment relationship.
Further, if Eligible Executive requests written consent from the Company to solicit any
particular employee in accordance with the provisions of this Section 9, Eligible Executive
will not discuss any employment possibility with such employee prior to securing the
Company’s written consent and, should the Company decline to grant such consent, Eligible
Executive will not at any time, either during or after the period for which Severance Pay is
being provided under Section 4(a), advise the subject employee that he or she was the
subject of a request under this Section 9 or that the Company declined to grant Eligible
Executive the right to discuss an employment possibility with the subject employee.

     (b) Nondisclosure. After a Separation from Service with the Company and, not by way of
limitation, as a condition of continued benefits under the Plan, the Eligible Executive shall not,
in any form or manner, directly or indirectly, divulge, disclose or communicate to any Person, or
utilize for the Eligible Executive’s personal benefit or for the benefit of any competitor

12

 

of the Company, any Confidential Information. The obligations of this paragraph shall survive
the period for which benefits are provided under the Plan.

     (c) Breach of this Section. Not by way of limitation, a breach of this Section by the
Eligible Executive shall result in (i) the immediate and permanent cessation of payment (or, in the
event of a benefit which would be paid as a lump sum, non-payment if not yet paid or a right of
recovery by the Company, if paid) of Severance Pay and the provision of Severance Benefits to such
Eligible Executive, (ii) the obligation of the Eligible Executive to repay to the Company upon
written demand ninety percent (90%) of the amount, cost or value of Severance Pay, Severance
Benefits and/or Suspended Equity Awards previously paid or provided to the Eligible Executive and
dependents of Eligible Executive, and (iii) the obligation of the Eligible Executive to pay to the
Company its costs and expenses in enforcing this Section (including court costs, expenses and
reasonable legal fees). Additionally, upon any breach or threatened breach of this Section, 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.

     Section 10. Plan Administration

     The Plan Administrator shall have the sole, absolute and final discretionary authority to
determine eligibility for Plan benefits and to construe the terms of the Plan, including the making
of factual determinations. The decisions of the Plan Administrator shall be final and conclusive
with respect to all questions concerning the interpretation and administration of the Plan. The
Plan Administrator may delegate to other persons responsibilities for performing certain of the
duties of the Plan Administrator under the terms of the Plan and may seek such expert advice as the
Plan Administrator deems reasonably necessary with respect to the Plan. The Plan Administrator
shall be entitled to rely upon the information and advice furnished by such delegatees and experts,
unless actually knowing such information and advice to be inaccurate or unlawful.

     The Plan Administrator shall establish and maintain a reasonable claims procedure for
Severance Pay and/or Suspended Equity Awards, including a procedure for appeal of denied claims. An
Eligible Executive shall be entitled to a statement of the appeals procedure upon request. In no
event shall an Eligible Executive or any other person be entitled to challenge a decision of the
Plan Administrator in arbitration, court or in any other administrative proceeding unless and until
the claim and appeals procedures established under the Plan have been complied with and exhausted.

     For Severance Benefits provided under the King Pharmaceuticals Medical, Dental and Vision Care
Plan, or any successor thereto, the claims procedure shall be determined and administered under the
terms of such plan.

13

 

     Section 11. Claims Procedure

     (a) In General. An Eligible Executive may file a Claim for Severance Pay benefits with the
Plan Administrator. The Plan Administrator will notify the claimant of its benefit determination
within a reasonable period of time, but in no event later than ninety (90) days after receipt of
the Claim. The ninety (90) day period may be extended by an additional ninety (90) days for matters
beyond the control of the Plan Administrator as long as the claimant is notified of the reasons for
such extension and the time by which a decision will be rendered prior to the expiration of the
initial ninety (90) day period. An adverse benefit determination by the Plan Administrator may be
appealed as provided in this Section.

     (b) Adverse Benefit Determination. The Plan Administrator will provide written or electronic
notification of an adverse benefit determination within the timeframes set forth in Section 11(a)
above. This notification will include (i) The specific reasons for the adverse benefit
determination; (ii) Reference to the specific Plan provisions on which the determination was based;
(iii) A description of any additional material or information necessary for the claimant to perfect
the Claim, and an explanation of why such material or information is needed; (iv) A description of
the Plan’s review procedures and the time limits applicable to such procedures; (v) A statement
that the claimant is entitled to receive, upon request and free of charge, reasonable access to,
and copies of, all documents, records and other information relevant to the Claim, other than
documents which are attorney work product or which are subject to attorney-client privilege; and
(vi) A statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA.

     (c) Appeals. Upon receipt of notification of an adverse benefit determination, the claimant
shall have sixty (60) days from such date to file an appeal with the Plan Administrator. The
claimant may submit written comments, documents, records and other information relating to the
Claim. The review shall take into account all comments, documents, records, and other information
submitted by the claimant relating to the Claim, without regard to whether such information was
submitted or considered in the initial benefit determination. The Plan Administrator will provide
written or electronic notification to the claimant of its decision on appeal within a reasonable
period of time, but in no event later than sixty (60) days after receipt of the appeal. This sixty
(60) day period may be extended by an additional sixty (60) days for matters beyond the control of
the Plan Administrator as long as the claimant is notified of the reasons for such extension and
the time by which a decision will be rendered prior to the expiration of the initial sixty (60) day
period. The Plan Administrator’s notification of its decision on appeal shall include the
following

	 	i)	 	The specific reasons for the appeal
determination;
	 
	 	ii)	 	Reference to the specific Plan
provisions on which the determination was based;
	 
	 	iii)	 	A statement that the claimant is
entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records and other
information relevant to the Claim,

14

 

other than documents which are attorney work product or which are
subject to attorney-client privilege; and

	 	iv)	 	A statement of the claimant’s right to
bring a civil action under Section 502(a) of ERISA.

     Section 12. No Assignment

     Severance Pay, Severance Benefits and/or Suspended Equity Awards payable under the Plan shall
not be subject to anticipation, alienation, pledge, sale, transfer, assignment, garnishment,
attachment, execution, encumbrance, levy, lien, or charge, and any attempt to cause such Severance
Pay, Severance Benefits and/or Suspended Equity Awards to be so subjected shall not be recognized,
except to the extent required by law.

     Section 13. No Employment Rights

     The Plan is not a contract for employment and shall not confer employment rights upon any
person. No person shall be entitled, by virtue of the Plan, to remain in the employ of the Company
and nothing in the Plan shall restrict the right of the Company or its successor to terminate the
employment of any Eligible Executive or other person at any time.

     Section 14. Plan Funding

     The payments to an Eligible Executive hereunder shall be made from assets which shall
continue, for all purposes, to be a part of the general, unrestricted assets of the Company. No
person shall have nor acquire any interest in any such assets by virtue of the provisions of this
Plan or any other agreement in connection with the Plan. The Company’s obligation hereunder shall
be an unfunded and unsecured promise to pay money in the future. To the extent that the Eligible
Executive acquires a right to receive payments from the Company under the provisions hereof, such
right shall be no greater than the right of any unsecured general creditor of the Company. No such
person shall have nor require any legal or equitable right, interest or claim in or to any property
or assets of the Company.

     Nothing contained in this Plan, and no action taken pursuant to its provisions by either party
hereto, shall create, nor be construed to create, a trust of any kind or a fiduciary relationship
between the Company and the Participant, his beneficiary, or any other person.

     Section 15. Survival of Plan Upon a Change in Control

     The Plan shall survive a Change in Control of the Company and shall be binding upon any
successor entity that is the survivor, successor, reorganized, affiliated or purchaser organization
resulting from a combination, restructuring, merger, functional reorganization, sale, affiliation
or other reorganization of the Company. Upon the Change in Control of the Company, the successor
entity shall assume the obligations and liabilities of the Plan. All Eligible Executives who were
employed by the Company as of a Change in Control shall continue to be eligible to receive the
Severance Pay, Severance Benefits and/or Suspended Equity Awards available under the Plan and such
Severance Pay, Severance Benefits and/or

15

 

Suspended Equity Awards shall be payable by the successor entity. Notwithstanding the
foregoing provisions of this Section, following a Change in Control of the Company, nothing in the
Plan shall preclude the successor entity from adopting its own new change in control severance plan
for employees covering a subsequent change in control, provided, however, that any such new change
in control severance plan shall not in any way change the ability of all Eligible Executives who
were employed by the Company as of a Change in Control to continue to be eligible to receive the
Severance Pay, Severance Benefits and/or Suspended Equity Awards available under the Plan, except
within the limitations of Section 20.

     Section 16. Applicable Law

     The Plan shall be governed and construed in accordance with ERISA as it applies to top hat
plans for a select group of management or highly compensated employees and, in the event that any
reference shall be made to State law, the internal laws of the State of Tennessee shall apply to
the extent not preempted by ERISA. It is intended that the Plan comply with applicable provisions
of Code Section 409A and the Treasury Regulations promulgated thereunder and, to the extent such
section or regulations apply, the Plan shall be construed and administered accordingly.

     Section 17. Severability

     If any provision of the Plan is found, held or deemed by a court of competent jurisdiction to
be void, unlawful or unenforceable under any applicable statute or other controlling law, the
remainder of the Plan shall continue in full force and effect.

     Section 18. Waivers

     The Plan Administrator shall have the right to waive all or any portion of the non-competition
and non-disclosure provisions set forth in the Release.

     Section 19. Plan Year

     The ERISA plan year of this Plan shall be the twelve-month period commencing on January 1 of
each year.

     Section 20. Amendment/Termination of Plan

     The Company reserves the right in its sole discretion to amend or terminate the Plan, and pay
amounts due hereunder, to the full extent permitted by and in accordance with Code Section 409A and
the Treasury Regulations promulgated thereunder at any time, retroactively or otherwise, either by
written resolution of the Company’s Board of Directors or the Compensation Committee. Any such
amendment or termination which would reduce or otherwise adversely affect the benefits of an
Eligible Executive who has previously incurred a Qualifying Separation may not take effect as to
the affected Eligible Executive without the written consent of the affected Eligible Executive.
Any such amendment or termination which would reduce or adversely affect the benefits which may be
payable to an Eligible Executive who has not yet incurred a Qualifying Separation at the time of
the amendment shall be effective not sooner than

16

 

(A) twenty-four (24) months from the date of such written action in the event the written
action occurs on or after the date of a Change in Control, or (B) twelve (12) months from the date
of such written action in the event the written action occurs prior to the date of a Change in
Control. Not by way of limitation of the foregoing, in the event of the termination of the Plan,
an Eligible Executive whose Severance Pay, Severance Benefits and/or Suspended Equity Awards are in
payment status when such Plan Separation occurs shall continue to be paid or provided his/her
Severance Pay, Severance Benefits and/or Suspended Equity Awards as if the Plan had not terminated.
The Exhibits to this Plan may be amended at any time by the Plan Administrator except to the
extent that such amendment would reduce or otherwise adversely affect the benefits payable to an
Eligible Executive under this Plan; in which case, such amendments must be made by the Board of
Directors or the Compensation Committee as otherwise outlined in this Section 20.

     Section 21. Recovery of Payments Made by Mistake

     An Eligible Executive shall be required to return immediately to the Company any Severance
Pay, Severance Benefits payments and/or Suspended Equity Awards, or portion thereof, made by a
mistake of fact or law.

     Section 22. Representations Contrary to the Plan

     No employee, officer, or director of the Company has the authority to alter, vary, or modify
the terms of the Plan except by means of an authorized written amendment to the Plan. No verbal or
written representations contrary to the terms of the Plan and its written amendments shall be
binding upon the Plan, the Plan Administrator, or the Company, nor may any such representation be
relied upon by Eligible Executive.

     Section 23. Intellectual Property 

     In order to be eligible to receive Severance Pay, Severance Benefits and/or
Suspended Equity Awards under this Severance Pay Plan, an Eligible Executive must agree, if
requested to do so by the Plan Administrator, to execute a release ensuring the following:

     (a) All intellectual property, including goodwill, on a worldwide basis, including without
limitation copyrights, trademarks, trade dress, service marks, know-how, trade secrets, inventions,
patent rights, methodologies, procedures, management tools, workshop materials, manuals, documents,
software, macros, data files, or other intellectual capital, including all improvements and
modifications (“Intellectual Property”) Eligible Executive has developed or created either during,
in connection with, or pursuant to Eligible Executive’s employment with the Company shall remain
the sole and exclusive property of the Company regardless of authorship or inventorship rights upon
a Separation from Service.

     (b) Eligible Executive shall promptly disclose to Company as of the date of Separation from
Service, and upon request by the Company after Separation of Service, all Intellectual Property
developed or created either during, in connection with, or pursuant to Eligible Executive’s
employment with the Company.

17

 

     (c) Eligible Executive shall return and surrender possession to the Company any and all
documents, memoranda, reports, notes, files, notebooks, records, information, materials, computer
hardware or software, data storage devices containing stored data, and any drafts, copies and
electronic files thereof, which references or discloses Intellectual Property in Eligible
Executive’s control or possession as of the date of his or her Separation.

     (d) Eligible Executive shall assign all of his or her interest and rights in and to any and
all Intellectual Property to Company.

     (e) At any time, upon request by Company, Eligible Executive shall promptly execute all
registrations, applications, assignments, renewals, extensions or other instruments; or take other
steps that Company shall deem necessary to secure, maintain and protect Company’s intellectual
property in the United States or any foreign country that was developed or created either during,
in connection with, or pursuant to Eligible Executive’s employment.

     (f) Eligible Executive shall not at any time, in any manner, under any circumstances, be
entitled to or claim any right, title or interest in or any commission, fee or other direct or
indirect benefit from Company with respect to the Intellectual Property.

     (g) Eligible Executive shall return and surrender possession to the Company property of the
Company of any nature whatsoever, including but not limited to keys, other methods of entry or
access to the Company’s physical premises, credit cards, identification badges, cellular phones and
other communication devices, and any other information, material, or equipment (or copies thereof)
in Eligible Executive’s control or possession as of the date of his or her Separation from Service.

     Section 24. Cooperation

     In order to be eligible to receive Severance Pay, Severance Benefits and/or
Suspended Equity Awards under this Plan, Eligible Executive must use his or her reasonable best
efforts to cooperate with the Company, its attorneys, agents, representatives, and employees with
respect to legal and business matters that are either known at the time of Eligible Executive’s
Separation from Service or that may later become known and that relate to Eligible Executive’s
service with the Company. Cooperation includes but is not limited to release of documents, meeting
with and discussing matters with Company legal counsel, review of documents, and attending
depositions, hearings, and trials on reasonable notice. The Company may decide, in its sole
discretion, to pay reasonable expenses of such cooperation; provided, however, that the Eligible
Executive’s obligation of cooperation under this Section 24 shall not depend on the Company’s
payment of expenses. A breach of this Section 24 shall be treated in the same way as a breach of
Section 9, as described in Section 9(c), above.

     Section 25. Miscellaneous Provisions

     All pay and other benefits (except Severance Pay, Severance Benefits and/or Suspended Equity
Awards), payable to an Eligible Executive as of his/her date of Separation from Service

18

 

with the Company according to the established policies, plans, and procedures of the Company
shall be paid in accordance with the terms of those established policies, plans, and procedures. In
addition, any benefit continuation or conversion rights which an Eligible Executive has as of
his/her date of Separation of employment with the Company according to the established policies,
plans, and procedures of the Company shall be made available to him/her.

	 	 	 	 	 
	 	KING PHARMACEUTICALS, INC. 

 	 
	 	By:  	 	 
	 	 	 	 
	 	Title:  	 	 
	 	 	 	 

19

 

	 	 	 	 	 

EXHIBIT 1

KING PHARMACEUTICALS, INC.

SEVERANCE PAY PLAN: TIER I

WAIVER, RELEASE AND NON-SOLICITATION,

NONCOMPETE AND NONDISCLOSURE AGREEMENT

     1. Release. In consideration for the Severance Pay, Severance Benefits and/or
Suspended Equity Awards 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 “Releasees”), 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
termination 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 termination, 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 arising out of or relating to my

Exhibit
1-1

 

employment with and/or the termination of my employment with the Company and/or any of
the other Releasees.

     2. Covenant Not to Sue. 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 termination of my employment with the Company and/or any of the other
Releasees. However, I understand that nothing within this Agreement is intended to forfeit or
negatively affect my ability or right to file a charge of discrimination with the Equal Employment
Opportunity Commission (“EEOC”) or participate in such a process by the EEOC. I do acknowledge, as
set forth below, that I have waived and will return to the Company any recovery of money damages
obtained on my behalf by the EEOC.

     3. Non-Disparagement. 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. I understand that nothing herein is intended to
prohibit me from testifying truthfully in any court or proceeding if subpoenaed to appear to do so.

     4. Non-competition and Non-disclosure.

     (a) Non-competition. I also agree, as additional consideration for the
Severance Pay, Severance Benefits and/or Suspended Equity Awards to be provided to me under the
terms of the King Pharmaceuticals, Inc. Severance Pay Plan: Tier I (“Plan”), that for the time
period for which the Severance Pay is calculated, I will not:

     (i) accept any employment, whether as an owner, partner, director, officer, employee,
agent, independent contractor, consultant, or in any other capacity, with any person OR
entity the business of which directly competes with any of the Company’s or its
subsidiaries’ or Affiliates’ material products in development or production as of the date
of my “Separation of Service” date with the Company under the Plan, in any geographic area
in which the Company markets its products;

     (ii) Solicit or attempt to solicit, directly or indirectly and in any capacity, any
customer or distributor with whom I had contact during the term of my employment with the
Company; or

     (iii) Solicit or attempt to solicit any employee of the Company or any of its
divisions, subsidiaries or affiliates to terminate his or her employment relationship.
Further, if I request written consent from the Company to solicit any particular employee in
accordance with the provisions of this Section, I will not discuss any employment
possibility with such employee prior to securing the Company’s written consent and,

Exhibit
1-2

 

should the Company decline to grant such consent, I will not at any time advise the subject
employee that he or she was the subject of a request under this Section or that the Company
declined to grant me the right to discuss an employment possibility with the subject
employee.

     (b) Nondisclosure. After a Separation from Service with the Company and, not by way
of limitation, as a condition of continued benefits under the Plan, I will not, in any form or
manner, directly or indirectly, divulge, disclose or communicate to any person or entity, or
utilize for the my own personal benefit or for the benefit of any competitor of the Company, any
Confidential Information of the Company as defined in the Plan. The obligations of this paragraph
shall survive the period for which benefits are provided under the Plan.

     5. Violations of Laws and Wrongful Activities. I acknowledge that as an employee of
the Company I had an affirmative obligation to report any violation of law and/or wrongful
activities of the Company, its agents or employees, and that I have fully disclosed to the Company
either in writing or anonymously through the Company’s 24 —hour, toll-fee Ethics and Compliance
Helpline any and all such matters of which I have been or become aware. I acknowledge that I have
not been retaliated against for reporting any allegations of any violations of law and/or wrongful
activities of the Company, its agents or employees.

     6. Intellectual Property. I also agree, as additional consideration for the Severance
Pay, Severance Benefits, and/or Suspended Equity Awards described above, as follows:

     (a) All intellectual property, including goodwill, on a worldwide basis, including without
limitation copyrights, trademarks, trade dress, service marks, know-how, trade secrets, inventions,
patent rights, methodologies, procedures, management tools, workshop materials, manuals, documents,
software, macros, data files, or other intellectual capital, including all improvements and
modifications (“Intellectual Property”) that I have developed or created either during, in
connection with, or pursuant to my employment with the Company shall remain the sole and exclusive
property of the Company regardless of authorship or inventorship rights upon a Separation from
Service.

     (b) I shall promptly disclose to Company as of the date of Separation from Service, and upon
request by the Company after Separation of Service, all Intellectual Property developed or created
either during, in connection with, or pursuant to my employment with the Company.

     (c) I shall return and surrender possession to the Company any and all documents, memoranda,
reports, notes, files, notebooks, records, information, materials, computer hardware or software,
data storage devices containing stored data, and any drafts, copies and electronic files thereof,
which references or discloses Intellectual Property in my control or possession as of the date of
my Separation from Service.

     (d) I shall assign all of my interest and rights in and to any and all Intellectual Property
to Company.

Exhibit
1-3

 

     (e) At any time, upon request by Company, I shall promptly execute all registrations,
applications, assignments, renewals, extensions or other instruments; or take other steps that
Company shall deem necessary to secure, maintain and protect Company’s intellectual property in the
United States or any foreign country that was developed or created either during, in connection
with, or pursuant to my employment.

     (f) I shall not at any time, in any manner, under any circumstances, be entitled to or claim
any right, title or interest in or any commission, fee or other direct or indirect benefit from
Company with respect to the Intellectual Property.

     (g) I shall return and surrender possession of all Company property of any nature whatsoever
to the Company, including but not limited to keys, other methods of entry or access to the
Company’s physical premises, credit cards, identification badges, cellular phones and other
communication devices, and any other information, material, or equipment (or copies thereof) in
Eligible Executive’s control or possession as of the date of his or her Separation from Service.

     7. Consequence of a Breach. I further acknowledge and agree in the event that I
breach the provisions of paragraph 2, 3, 4 or 5 above, (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, Severance Benefits and/or Suspended Equity Awards paid or provided to me, 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 specifically will not affect my
Release of claims as set forth in Paragraph 1) 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.

     8. Waiver of Recovery. 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

Exhibit
1-4

 

or related to my employment with and/or separation from employment with the Company and/or any
of the other Releasees.

     9. No Compensation Due. I acknowledge that I have been paid and/or received all leave
(paid or unpaid), compensation, wages, bonuses, commissions, and/or benefits to which I may be
entitled and that no other leave (paid or unpaid), compensation, wages, bonuses, commissions and/or
benefits are due me.

     10. Waiver of Reinstatement Rights. 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.

     11. Review Period. 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.

     12. Revocation. 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, Severance Benefits and/or Suspended Equity Awards.

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

     14. Indemnification. 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.

     15. Consideration. 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.

     16. Severability. 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.

Exhibit
1-5

 

     17. Governing Law. 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.

     18. Knowing and Voluntary Release. 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 me and the Company.

     19. Acknowledgment of Compliance. Because this Agreement includes a release and
waiver as to claims under the AGE DISCRIMINATION IN EMPLOYMENT ACT (“ADEA”), my signature below
acknowledges that it complies with the Older Worker Benefit Protection Act (“OWBPA”) of 1990 and
further acknowledges that I confirm, understand, and agree to the terms and conditions of this
Agreement; that these terms are written in lay person terms, and that I have been fully advised of
my 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 I do not waive any rights or claims under the ADEA that may arise
after the date this Agreement is signed by me, and specifically, that under this Agreement, I am
receiving consideration beyond anything of value to which I am already entitled. It is understood
by me that I have been advised to consult with an attorney of my choice before signing. I also
understand that I 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, I 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.

     20. Right of Revocation. My signature also acknowledges that, in compliance with the
OWBPA condition above, I have been fully advised by the Company of my 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 my 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, at King Pharmaceuticals, Inc., 501 Fifth Street, Bristol, Tennessee, 37620, Fax No.                
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.

     21. Disclosure under ADEA, 29 U.S.C. § 626(f)(1)(H). If my severance is part of an
employment termination program offered to a group of employees, pursuant to § 626(f)(1)(H) of the
Age Discrimination in Employment Act, the Company has provided information to me concerning the
availability of the severance package in Exhibit A attached hereto. By signing immediately below
this Paragraph, I acknowledge that I have received such information about the individuals who have
been selected for termination of employment and offered Plan benefits and those who have not been
selected to participate in the employment termination program.

Exhibit
1-6

 

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

	 	 	 	 	 
	 	 	 
	 	  	 	 
	 	 	Name of Eligible Executive — Please Print       	 
	 	 	 	 
	 	  	 	 
	 	 	(Signature of Eligible Executive)	 
	 	 	 	 
	 	  	 	 
	 	 	(Date)	 
	 

PLEASE RETURN TO:

Plan Administrator

King Pharmaceuticals, Inc.

Severance Pay Plan: Tier I

Exhibit
1-7

 

EXHIBIT 2

WELFARE PLANS INCLUDED IN SEVERANCE BENEFITS

	1.	 	King Pharmaceuticals, Inc. Medical, Dental and Vision Care Benefit Plan (including
Prescription Coverage) (or any successor plan or plans thereto).

Exhibit 2-1

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