Document:

EX-10.2

Exhibit 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), effective as of
February 8, 2008, to be effective as of January 1, 2008, is by and between First Acceptance
Corporation, a Delaware corporation (the “Company”), and Keith Bornemann
(“Executive”).

     In consideration of the continued employment of Executive by the Company, the grant to
Executive by the Company on the date hereof of an equity award, and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive, intending to be legally bound, hereby agree as follows:

     1. Employment. The Company agrees to employ Executive, and Executive accepts such
employment, upon the terms and conditions set forth in this Agreement, for the period beginning as
of the date hereof and ending upon his separation pursuant to Section 4 hereof (the
“Employment Period”).

     2. Position and Duties.

     (a) During the Employment Period, Executive shall serve as Corporate Controller of the Company
and shall have the normal duties, responsibilities, functions and authority of such position.

     (b) During the Employment Period, Executive shall report to the Chief Financial Officer of the
Company and shall devote his best efforts and his full business time and attention (except for time
devoted to charitable and non-profit activities and service as a director on the board(s) of
directors of companies (whether public or private) other than the Company, in each case, in a
manner that does not interfere with the performance of his duties to the Company, vacation periods
in accordance with the terms set forth herein, and periods of illness) to the business and affairs
of the Company. Executive shall perform his duties, responsibilities and functions to the Company
hereunder to the best of his abilities in a diligent, trustworthy and businesslike manner.

     3. Compensation and Benefits.

     (a) Commencing on the date hereof and continuing throughout the Employment Period, Executive’s
base salary shall be $135,000 per annum (the “Base Salary”). Executive’s Base Salary shall
be payable by the Company in regular installments consistent with the Company’s general payroll
practices. Executive’s Base Salary for any partial year shall be pro rated based upon the number
of days elapsed in such year within the Employment Period. The Company shall perform an annual
review of Executive’s Base Salary based on Executive’s performance of his duties and the Company’s
other compensation policies; provided that the Base Salary shall not be reduced below $135,000.

     (b) During the Employment Period, Executive shall be eligible for an annual bonus of up to
35.0% of the Base Salary payable to Executive with respect to each fiscal year of the Company (the
“Annual Bonus”). In each year, the amount of the Annual Bonus shall be determined based
upon the Company’s evaluation of Executive’s personal performance and such

 

 

other criteria as may be determined by the Company. Each such bonus shall be paid to
Executive reasonably promptly following the determination of the amount of such bonus, but in any
event within the time periods required by applicable law (including Treasury Regulation
1.409A-1(b)(4)).

     (c) During the Employment Period, Executive shall be entitled to such health and welfare
benefits (including participation in any 401(k) plan, profit sharing plan and/or stock purchase
plan, and consideration for participation in any stock option plan) as are made available to the
Company’s employees. Executive shall be entitled to three (3) weeks vacation per year.

     (d) During the Employment Period, the Company shall pay or reimburse Executive for all
reasonable expenses incurred by him in the course of performing his duties and responsibilities
under this Agreement which are consistent with the Company’s policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to the Company’s normal
requirements with respect to reporting and documentation of such expenses.

     (e) All amounts payable to Executive hereunder shall be subject to all withholding of the
Company required by law.

     (f) The Company will indemnify and hold harmless Executive against all expenses, liabilities
and losses arising in connection with any action, suit or proceeding that he is made a party to, or
threatened to be made a party to, by reason of his employment with the Company or the fact that he,
or a person of whom he is or was the legal representative, is or was a director or officer of the
Company or is or was serving at the request of the Company as a director, officer, employee,
fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other
enterprise, in each case to the fullest extent provided for under the Company’s articles of
incorporation and bylaws, each as in effect on the date of this Agreement.

     4. Term; Severance.

     (a) The Employment Period will continue until Executive’s resignation, death or Disability (as
defined below) or the Company’s termination of the Employment Period at any time with or without
Cause (as defined below), in each case a “Separation” hereunder. Except as otherwise
provided herein, any termination of the Employment Period by the Company shall be effective as
specified in a written notice from the Company to Executive, but not sooner than the date on which
the notice is delivered.

     (b) In the event that the Company terminates Executive’s employment without Cause or Executive
resigns with Good Reason (as defined below) within twelve (12) months following the occurrence of
an event described in Section 4(f), Executive shall be entitled to:

     (i) receive his Base Salary through the effective date of the Separation,

     (ii) receive compensation, in accordance with Company policy, for any accrued and unused
vacation as of the date of the Separation,

     (iii) reimbursement for expenses in accordance with Section 3(d),

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     (iv) any accrued and unpaid bonus owed to Executive as of the date of the Separation (but only
to the extent the targets or other criteria regarding such bonus are met during the relevant
period),

     (v) receive an amount equal to Executive’s then current Base Salary, payable in regular
installments in accordance with the Company’s general payroll practices in effect on the date of
the Separation, for the period commencing on the day immediately following the Separation and
continuing through the first anniversary of the Separation (the “Severance Period”);
provided that, if the Company terminates Executive’s employment without Cause or Executive
resigns with Good Reason, in each case, within twelve (12) months following a Change in Control (as
defined below), then Executive shall be entitled to receive an amount equal to 150% of Executive’s
then current Base Salary, payable in one lump sum as of the effective
date of such Change in Control, and

     (vi) continue to participate during the Severance Period (at the Company’s expense to the same
extent as participation for other employees of the Company is at the Company’s expense) in all
employee health benefit programs made generally available to the
Company’s employees (other than bonus and incentive compensation
plans)  to the extent
permitted under the terms of such programs and under applicable law (it being understood that if
Executive is unable to participate in any such plan by reason of prohibitions under the terms of
such programs or under applicable law, the Company shall, in lieu of such participation, pay to
Executive an amount in cash equivalent
to the value of such participation); provided that Executive will be entitled to the
amounts payable pursuant to clauses (v) and (vi) of this Section 4(b) if and only if
Executive has executed and delivered to the Company a General Release in form and substance
substantially similar to Exhibit A attached hereto. Notwithstanding the foregoing, all
such rights to payments pursuant to clauses (v) and (vi) of this Section 4(b) shall cease
in the event that the Company determines that Executive has breached any provision of Section
5, Section 6 or Section 7 hereof. For purposes hereof, “Change in
Control” means any transaction or event constituting a “Change in Control” as defined in the
Company’s 2002 Long Term Incentive Plan, as amended.

     (c) In the event Executive ceases to be employed by the Company for any reason other than a
termination by the Company without Cause or Executive’s resignation for Good Reason within twelve
(12) months following the occurrence of an event described in Section 4(f), Executive shall be
entitled to receive only his Base Salary through the effective date of the Separation,
compensation, in accordance with Company policy, for any accrued and unused vacation, reimbursement
for expenses in accordance with Section 3(d), and any accrued and unpaid bonus (but only to
the extent the targets or other criteria regarding such bonus are met during the relevant period),
and Executive shall not be entitled to any other salary, compensation or benefits from the Company
or its Subsidiaries (as defined below) thereafter.

     (d) Except as otherwise expressly provided herein, all of Executive’s rights to salary,
bonuses, fringe benefits and other compensation hereunder which would otherwise accrue or become
payable after the Separation shall cease upon such termination (other than those expressly required
under applicable law, such as COBRA).

     (e) For purposes of this Agreement, “Cause” shall mean (i) Executive’s commission of a
felony or a crime involving moral turpitude, (ii) any act of dishonesty or fraud

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on the part of Executive that has caused material harm to the Company, and/or (iii) the
willful and continued failure by Executive to substantially perform his duties and obligations
under this Agreement (other than any such failure resulting from incapacity due to physical or
mental illness), or the gross negligence or willful misconduct by Executive with respect to the
Company or any of its Subsidiaries, after a demand by the Company that specifically identifies the
manner in which the Company believes that he has not substantially performed his duties or has
committed gross negligence or willful misconduct and the failure by Executive to cure such failure
within 30 days after delivery of such demand.

     (f) For purposes of this Agreement, “Good Reason” shall mean one or more of the
following reasons that are not cured by the Company within 30 days after notice by Executive to the
Board of such failure or breach, which notice must be provided by the Executive within 90 days
following the occurrence of the failure or breach: (i) the Company reduces the amount of
Executive’s compensation in a manner that constitutes a breach of this Agreement, or otherwise
fails to perform in any material respect or breaches in any material respect its other obligations
under this Agreement; (ii) the Company assigns to Executive any duties materially inconsistent with
his position, duties, responsibilities and status with the Company, materially reduces his
authority, materially changes his reporting responsibilities, titles or offices, or removes
Executive from any such positions (except in connection with the termination of his employment by
the Company for Cause, by Executive other than for Good Reason, or as a result of Executive’s death
or Disability) or (iii) the Company changes Executive’s place of work to a location more than 50
miles from the Company’s current corporate headquarters. Notwithstanding anything contained herein
to the contrary, Executive may not terminate his employment with the Company pursuant to Section
4(f)(ii) within the six (6) month period immediately following a Change in Control of the Company.

     (g) For purposes of this Agreement, “Disability” shall mean Executive’s incapacitation
or other absence from his full-time duties hereunder for six consecutive months or for at least 180
days during any 12-month period, in either case as a result of a mental or physical illness or
injury.

     (h) Executive shall not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided
for herein be reduced by any compensation earned by Executive as a result of employment by another
employer or by retirement benefits after the date of Separation or otherwise.

     (i) Six Month Delay of Certain Payments. It is intended that (i) each payment or
installment of payments provided under this Agreement is a separate “payment” for purposes of
Section 409A of the Code 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 the foregoing, in the event the payment of any amounts payable
pursuant to this Section 4 hereof within six months of the date of Executive’s termination
of employment would cause Executive to incur any additional tax under Section 409A of the Code
(“Section 409A”) (as determined by Executive’s counsel, if requested by Executive), then
payment of such amounts shall be delayed until the date that is six (6) months

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following Executive’s termination date (the “Earliest Payment Date”). If this
provision becomes applicable, it is anticipated that payments that would have been made prior to
the Earliest Payment Date in the absence of this provision would be paid as a lump sum on the
Earliest Payment Date and the remaining severance benefits or other payments would be paid
according to the schedule otherwise applicable to the payments.

     5. Confidential Information. Executive acknowledges that the information,
observations and data (including trade secrets) to be obtained by him while employed by the Company
and/or any of its Subsidiaries concerning the business or affairs of the Company and/or its
Subsidiaries (“Confidential Information”) are the property of the Company and its
Subsidiaries. Therefore, Executive agrees that he shall not disclose to any person, other than in
the course of the performance of his duties to the Company, or use for his own purposes any
Confidential Information, unless and to the extent that (i) the Confidential Information becomes
generally known to and available for use by the public other than as a result of Executive’s acts
or omissions or (ii) such disclosure or use is authorized by the Company. Executive shall deliver
to the Company at the termination of the Employment Period, or at any other time the Company may
request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and
other documents and data (and copies thereof) embodying or relating to the Confidential
Information, Work Product (as defined below) or the business of the Company or any of its
Subsidiaries which Executive may then possess or have under his control. For purposes of this
Agreement, “Subsidiary” shall mean any corporation or other entity of which the securities
or other ownership interests having the voting power to elect a majority of the board of directors
or other governing body are, at the time of determination, owned by the Company directly or through
one of more Subsidiaries.

     6. Inventions, Patents and Other Intellectual Property. Executive acknowledges that
all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods,
designs, analyses, drawings, reports, patent applications, copyrightable work and mask work
(whether or not including any Confidential Information) and all registrations or applications
related thereto, and all other proprietary information and all similar or related information
(whether or not patentable) which relate to the Company’s or any of its Subsidiaries’ actual or
anticipated business, research and development or existing or future products or services and which
are conceived, developed or made by Executive (whether alone or jointly with others) while employed
by the Company and/or its Subsidiaries, whether before or after the date of this Agreement
(“Work Product”), belong to the Company or such Subsidiary. Executive shall promptly
disclose such Work Product to the Company and, at the Company’s expense, perform all actions
reasonably requested by the Company (whether during or after the Employment Period) to establish
and confirm such ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).

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     7. Non-Compete, Non-Solicitation. In further consideration of the compensation to be
paid to Executive hereunder, Executive acknowledges that in the course of his employment with the
Company he will become familiar with the trade secrets of the Company and its Subsidiaries and with
other Confidential Information concerning the Company and its Subsidiaries and that his services
have been and will be of special, unique and extraordinary value to the Company and its
Subsidiaries. Therefore, Executive agrees that:

     (a) during the Employment Period and for the period commencing with the Separation and
continuing until the first anniversary of the Separation (the “Noncompete Period”),
Executive shall not, within the United States, directly or indirectly own any interest in, manage,
control, participate in, consult with, render services for, or in any manner engage in any business
that is involved in the development, marketing, retail sale, administration or underwriting of
non-standard automobile insurance programs anywhere in the United States; provided that
nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the
outstanding equity interests of any class of a corporation, partnership, limited liability company,
or other entity, so long as Executive has no active participation in the business of such entity;

     (b) during the Noncompete Period, Executive shall not, other than in the course of performing
his duties on behalf of the Company while an officer thereof, directly or indirectly through
another person or entity (i) induce or attempt to induce any employee of the Company or any of its
Subsidiaries, other than a member of Executive’s family, to leave the employ of the Company or any
of its Subsidiaries, or in any way interfere with the relationship between the Company or any of
its Subsidiaries and any employee thereof, (ii) hire any person, other than a member of Executive’s
family, who was an employee of the Company or any of its Subsidiaries at any time during the
one-year period immediately preceding the Separation, (iii) induce or attempt to induce any
customer, supplier, licensee or other business relation of the Company or any of its Subsidiaries
to cease doing business with the Company or any of its Subsidiaries, or (iv) directly or indirectly
acquire or attempt to acquire an interest in any business relating to the business of the Company
or any of its Subsidiaries and with which the Company or any of its Subsidiaries has entertained
discussions, or has requested and received information, relating to the acquisition of such
business by the Company or any Subsidiary in the two-year period immediately preceding the
Separation;

     (c) if, at the time of enforcement of this Section 7, a court shall hold that the
duration, scope or area restrictions stated herein are unreasonable under circumstances then
existing, the parties agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or area and that the court shall
be allowed to revise the restrictions contained herein to cover the maximum period, scope and area
permitted by law;

     (d) in the event of the breach by Executive of any of the provisions of this Section
7, the Company and its Subsidiaries, in addition and supplementary to other rights and remedies
existing in their favor, shall be entitled to specific performance and/or injunctive or other
equitable relief from a court of competent jurisdiction in order to enforce or prevent any
violations of the provisions hereof (without posting a bond or other security). In addition,
Executive agrees that, in the event of a breach or violation by Executive of this Section
7, the Noncompete Period shall be tolled until such breach or violation has been duly cured;
and

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     (e) the provisions of this Section 7 are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this Agreement. In
addition, Executive agrees and acknowledges that the restrictions contained in Section 5,
Section 6 and this Section 7 do not preclude Executive from earning a livelihood,
nor do they unreasonably impose limitations on Executive’s ability to earn a living. In addition,
Executive agrees and acknowledges that the potential harm to the Company of the non-enforcement of
Section 5, Section 6 and/or this Section 7 outweighs any potential harm to
Executive of its enforcement by injunction or otherwise. In addition, Executive acknowledges that
he has carefully read this Agreement and has given careful consideration to the restraints imposed
upon Executive by this Agreement and is in full accord as to their necessity for the reasonable and
proper protection of confidential and proprietary information of the Company now existing or to be
developed in the future. Executive expressly acknowledges and agrees that each and every restraint
imposed by this Agreement is reasonable with respect to subject matter, time period and
geographical area.

     8. Executive’s Representations. Executive hereby represents and warrants to the
Company that (i) the execution, delivery and performance of this Agreement by Executive do not and
shall not conflict with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which Executive is a party or by which Executive is bound,
(ii) Executive is not a party to or bound by any employment agreement, noncompete agreement,
confidentiality agreement or any similar agreement with any other person or entity and (iii) upon
the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and
binding obligation of Executive, enforceable in accordance with its terms, except as such
enforceability may be limited by law (including bankruptcy, insolvency, reorganization, moratorium
and similar laws relating to or affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a proceeding in equity or at law)).
Executive hereby acknowledges and represents that he has consulted with independent legal counsel
regarding his rights and obligations under this Agreement.

     9. Survival. Sections 3(f) and 4 through 18 (inclusive), and
all rights of Executive to compensation and benefits relating to periods prior to the termination
of the Employment Period, shall survive and continue in full force in accordance with their terms
notwithstanding the termination of the Employment Period.

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     10. Notices. All notices and other communications hereunder shall be in writing and
shall be deemed duly given (a) on the date of delivery if delivered personally, or upon
confirmation of receipt if delivered by telecopy or facsimile (but only if a copy of such telecopy
or facsimile is delivered to the recipient by a recognized next-day courier service), (b) on the
first business day following the date of dispatch if delivered by a recognized next-day courier
service or (c) on the fifth business day following the date of mailing if delivered by registered
or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as have been previously
designated in writing to the party sending such notice by the party to receive such notice:

Notices to Executive:

Keith Bornemann

104 Breaker Circle

Brentwood, TN 37027

Notices to the Company:

First Acceptance Corporation

3322 West End Ave., Suite 1000

Nashville, Tennessee 37203

Fax: (615) 844-2898

Attention: Chief Executive Officer

or such other address or facsimile number or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any notice under this
Agreement shall be deemed to have been given when so delivered, sent or mailed.

     11. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any action in any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.

     12. Complete Agreement. This Agreement, those documents expressly referred to herein
and other documents of even date herewith embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or representations by or
among the parties, written or oral, which may have related to the subject matter hereof in any way.
All employment agreements between Executive and the Company dated prior to the date hereof and
currently in effect are hereby terminated; provided, however, that Executive shall continue to be
entitled to receive base salary and expense reimbursement payments under those agreements for
periods prior to the date hereof to the extent not duplicative with compensation and benefits
payable hereunder.

     13. No Strict Construction. The language used in this Agreement shall be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no rule of strict
construction shall be applied against any party.

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     14. Counterparts. This Agreement may be executed in separate counterparts, each of
which is deemed to be an original and all of which taken together constitute one and the same
agreement.

     15. Successors and Assigns. This Agreement is intended to bind and inure to the
benefit of and be enforceable by Executive and the Company and their respective heirs, successors
and assigns, provided that neither party may assign his or its rights or delegate his or its duties
or obligations hereunder without the prior written consent of the other.

     16. Choice of Law. All issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be
governed by, and construed in accordance with, the internal laws of the State of Tennessee.

     17. Amendment and Waiver. The provisions of this Agreement may be amended or waived
only with the prior written consent of the Company, its successors and assignees, and Executive,
and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing
or exercising any of the provisions of this Agreement shall be deemed to be an implied waiver of
any provision of this Agreement.

     18. Arbitration.

     (a) Each party hereto agrees that arbitration, conducted in Nashville, Tennessee, in
accordance with the rules of the American Arbitration Association, shall be the sole and exclusive
method for resolving any claim or dispute arising out of or relating to the rights and obligations
acknowledged and agreed to in this Agreement and the employment of Executive by the Company and its
Subsidiaries (including, without limitation, disputes and claims regarding employment
discrimination, sexual harassment, termination and discharge). The arbitrator shall be directed to
issue a written decision to be delivered to both parties, addressing each issue disputed by the
parties, stating the arbitrator’s findings and reasons therefor, and stating the nature and amount
of any damages, compensation or other relief awarded (the “Final Determination”). The
parties agree that the result of any arbitration hereunder shall be final, conclusive and binding
on all of the parties hereto.

     (b) Any party hereto may institute litigation to enforce any Final Determination. Each party
hereto hereby irrevocably submits to the jurisdiction of any United States District Court or state
court of competent jurisdiction sitting in Nashville, Tennessee, and agrees that such court shall
be the exclusive forum for the enforcement of any Final Determination. Each party hereto
irrevocably consents to service of process by registered mail or personal service and waives any
objection on the grounds of personal jurisdiction, venue or inconvenience of the forum. Each party
hereto further agrees that each other party hereto may initiate litigation in any court of
competent jurisdiction to execute any judicial judgment enforcing a Final Determination.

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     IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Employment
Agreement as of the date first written above.

	 	 	 	 	 
	 	 	FIRST ACCEPTANCE CORPORATION
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 

	 	/s/ Kevin P. Cohn
	 	 	 
	 

	 	By:	 	Kevin P. Cohn
	 

	 	Its:	 	Senior Vice President and Chief
Financial Officer
	 
	 	 	 	 
	 
	 	/s/ Keith Bornemann
	 	 	 
	 	 	Keith Bornemann

 

 

Exhibit A

GENERAL RELEASE

     I, Keith Bornemann, in consideration of and subject to the performance by First Acceptance
Corporation, a Delaware corporation (together with its Subsidiaries (as defined in the Agreement),
the “Company”), of its material obligations under the Amended and Restated Employment
Agreement, effective as of
_________ ___, 2008 (the “Agreement”), do hereby release and
forever discharge as of the date hereof the Company and all present and former directors, officers,
agents, representatives, employees, successors and assigns of the Company and its direct or
indirect owners (collectively, the “Released Parties”) to the extent provided below.

	1.	 	I understand that any payments or benefits paid or granted to me under clauses (v) and (vi)
of Section 4(b) of the Agreement represent, in part, consideration for signing this General
Release and are not salary, wages or benefits to which I was already entitled. I understand
and agree that I will not receive the payments and benefits specified in clauses (v) and (vi)
of Section 4(b) of the Agreement unless I execute this General Release and do not revoke this
General Release within the time period permitted hereafter or breach this General Release.
	 
	2.	 	Except as provided in paragraph 4 below, I knowingly and voluntarily release and forever
discharge the Company and the other Released Parties from any and all claims, controversies,
actions, causes of action, cross-claims, counter-claims, demands, debts, compensatory damages,
liquidated damages, punitive or exemplary damages, other damages, claims for costs and
attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and
present (through the date of this General Release) and whether known or unknown, suspected, or
claimed against the Company or any of the Released Parties which I, my spouse, or any of my
heirs, executors, administrators or assigns, may have, which arise out of or are connected
with my employment with, or my separation from, the Company (including, but not limited to,
any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964,
as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as
amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as
amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of
1993; the Civil Rights Act of 1866, as amended; the Worker Adjustment Retraining and
Notification Act; the Employee Retirement Income Security Act of 1974; any applicable
Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts;
or under any other federal, state or local civil or human rights law, or under any other
local, state, or federal law, regulation or ordinance; or under any public policy, contract or
tort, or under common law; or arising under any policies, practices or procedures of the
Company; or any claim for wrongful discharge, breach of contract, infliction of emotional
distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’
fees incurred in these matters) (all of the foregoing collectively referred to herein as the
“Claims”).

 

 

	3.	 	I represent that I have made no assignment or transfer of any right, claim, demand, cause of
action or other matter covered by paragraph 2 above.
	 
	4.	 	I agree that this General Release does not waive or release any rights or claims that I may
have under the Age Discrimination in Employment Act of 1967 which arise after the date I
execute this General Release. I acknowledge and agree that my separation from employment with
the Company in compliance with the terms of the Agreement shall not serve as the basis for any
claim or action (including, without limitation, any claim under the Age Discrimination in
Employment Act of 1967).
	 
	5.	 	In signing this General Release, I acknowledge and intend that it shall be effective as a bar
to each and every one of the Claims hereinabove mentioned or implied. I expressly consent
that this General Release shall be given full force and effect according to each and all of
its express terms and provisions, including those relating to unknown and unsuspected Claims
(notwithstanding any state statute that expressly limits the effectiveness of a general
release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating
to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this
waiver is an essential and material term of this General Release and that without such waiver
the Company would not have agreed to the terms of the Agreement. I further agree that in the
event I should bring a Claim seeking damages against the Company, or in the event I should
seek to recover against the Company in any Claim brought by a governmental agency on my
behalf, this General Release shall serve as a complete defense to such Claims. I further
agree that I am not aware of any pending charge or complaint of the type described in
paragraph 2 hereof as of the execution of this General Release.
	 
	6.	 	I agree that neither this General Release, nor the furnishing of the consideration for this
General Release, shall be deemed or construed at any time to be an admission by the Company,
any Released Party or myself of any improper or unlawful conduct.
	 
	7.	 	I agree that I will forfeit all amounts payable by the Company pursuant to the Agreement if I
challenge the validity of this General Release. I also agree that if I violate this General
Release by suing the Company or the other Released Parties, I will pay all costs and expenses
of defending against the suit incurred by the Released Parties, including reasonable
attorneys’ fees, and return all payments received by me pursuant to the Agreement.
	 
	8.	 	I agree that this General Release is confidential and agree not to disclose any information
regarding the terms of this General Release, except to my immediate family and any tax, legal
or other counsel I have consulted regarding the meaning or effect hereof or as required by
law, and I will instruct each of the foregoing not to disclose the same to anyone.
	 
	9.	 	Any non-disclosure provision in this General Release does not prohibit or restrict me (or my
attorney) from responding to any inquiry about this General Release or its underlying facts
and circumstances by the Securities and Exchange Commission (SEC), the National Association of
Securities Dealers, Inc. (NASD), any other self-regulatory organization or governmental
entity.

 

 

	10.	 	I agree to reasonably cooperate with the Company in any internal investigation or
administrative, regulatory or judicial proceeding. I understand and agree that my cooperation
may include, but not be limited to, making myself available to the Company upon reasonable
notice for interviews and factual investigations; appearing at the Company’s request to give
testimony without requiring service of a subpoena or other legal process; volunteering to the
Company pertinent information; and turning over to the Company all relevant documents which
are or may come into my possession all at times and on schedules that are reasonably
consistent with my other permitted activities and commitments. I understand that in the event
the Company asks for my cooperation in accordance with this provision, the Company will
reimburse me solely for reasonable travel expenses, including lodging and meals, upon my
submission of receipts.
	 
	11.	 	Notwithstanding anything in this General Release to the contrary, this General Release shall
not relinquish, diminish, or in any way affect any rights or claims arising out of any breach
by the Company or by any Released Party of the Agreement.
	 
	12.	 	In the event the Company breaches its obligation to make payments to me pursuant to Section
4(b) of the Agreement in accordance with the terms and subject to the conditions set forth in
the Agreement, and such breach is not cured within 15 days after written notice by me to the
Company in accordance with the notice provisions set forth in the Agreement, then this General
Release shall terminate and be of no further force or effect.
	 
	13.	 	Whenever possible, each provision of this General Release shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this General
Release is held to be invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision or any other jurisdiction, but this General Release shall be
reformed, construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:

	 	1.	 	I HAVE READ IT CAREFULLY;
	 
	 	2.	 	I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS,
INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF
1967, AS AMENDED; TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY
ACT OF 1963; THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED;
	 
	 	3.	 	I VOLUNTARILY CONSENT TO EVERYTHING IN IT;
	 
	 	4.	 	I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND HAVE
DONE SO, OR, AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY
OWN VOLITION;

 

 

	 	5.	 	I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS GENERAL RELEASE
SUBSTANTIALLY IN ITS FINAL FORM ON
_________ ___, ___TO CONSIDER IT AND THE
CHANGES MADE SINCE THE _________ ___, ___VERSION OF THIS GENERAL RELEASE ARE
NOT MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAY PERIOD;
	 
	 	6.	 	I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS GENERAL RELEASE
TO REVOKE IT AND THAT THIS GENERAL RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE
UNTIL THE REVOCATION PERIOD HAS EXPIRED;
	 
	 	7.	 	I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE
ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND
	 
	 	8.	 	I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED,
CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF THE COMPANY AND BY ME.

	 	 	 
	DATE:       
              
 
              
      ,                     

	 	 
	 
	 	Keith BornemannEX-10.1

Exhibit 10.1

NOTE: CERTAIN MATERIAL HAS BEEN REDACTED FROM THIS DOCUMENT AND FILED SEPARATELY WITH THE SEC
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2. THE LOCATIONS OF THESE
REDACTIONS ARE INDICATED THROUGHOUT THE DOCUMENT BY THE FOLLOWING MARKING: [***].

2009 EXECUTIVE MANAGEMENT INCENTIVE AWARDS

As Adopted by the Compensation and Human Resources Committee of the Board of Directors on March 23, 2009

Introduction

     2009 Executive Management Incentive Awards (“EMIA”), made pursuant to Article 9 of the King
Pharmaceuticals, Inc. (the “Company”) Incentive Plan (the “Plan”), will be based upon one or more
financial objectives (“Financial Objectives”). In determining the potential EMIA payout for any
participant, the Financial Objectives shall be evaluated and applied either by the Committee or by
the Chief Executive Officer, as further detailed below. All capitalized terms not otherwise
defined shall have the meanings assigned to them in the Plan.

Administration

     The Compensation and Human Resources Committee of the Board of Directors of the Company (the
“Committee”) shall have complete discretionary authority over the administration of the EMIAs as
set forth herein including, without limitation, the authority to adjudicate claims related to
EMIAs, interpret the terms of EMIAs, and to resolve disputes and factual questions related to
EMIAs. Determinations of the Committee shall be binding on the Company and the EMIA participants.

Eligibility to Participate

     Except as otherwise determined by the Committee, executives having the title of Vice President
or more senior titles as of January 1, 2009 shall be eligible to participate in the 2009 EMIA. The
following officers shall be designated “Top Executives” for purposes of the Plan: President and
Chief Executive Officer; Chief Financial Officer; Chief Commercial Officer; President, Alpharma
Animal Health; Chief Legal Officer; Corporate Compliance Officer; Chief Science Officer.

          The Committee and/or the Chief Executive Officer, as further detailed below in the section
entitled “Approval of Objectives”, may establish an EMIA for an executive who is hired or promoted
to fill an EMIA-eligible position after January 1, 2009; provided, however, that

	 	a.	 	unless the Committee shall determine otherwise, an EMIA may be established for a Top
Executive after 90 days have elapsed since January 1, 2009 only if 75.1% or more of the
performance time period is remaining at the time the EMIA is established, in accordance
with Treas. Reg. § 1.162-27(e);
	 
	 	b.	 	any executive hired after September 30, 2009 is ineligible for an EMIA; and
	 
	 	c.	 	any employee of the Company promoted into an EMIA-eligible position who becomes an EMIA
Participant (but who is not a Top Executive) shall participate prorata in the EMIA

 

 

	 	 	 	program and in any other 2009 cash incentive plan in which the employee participated prior
to becoming an EMIA Participant.

Objectives

     The EMIA for each Participant shall be based entirely upon one or more Financial Objectives.
Each Financial Objective shall be based upon prospective financial goals, the accomplishment of
which is substantially uncertain at the time of the establishment of the EMIA. Unless the Committee
shall determine otherwise, EMIAs for Top Executives shall be established during the first 25% of
the applicable performance period.

Approval of Objectives

     The Committee shall establish and approve each Financial Objective and any amendments thereto.

Weighting of Objectives

     The weighting of EMIA objectives shall be as follows:

	 	 	 
	 	 	Financial
	Executive	 	Objective*
	President and Chief Executive Officer

	 	100% Corporate Cash from Operations
	 
	 	 
	Steven J. Andrzejewski and Commercial

	 	80% Corporate Cash from Operations;
	Operations Participants

	 	20% Total prescriptions and/or
	 

	 	units for promoted products
	 
	 	 
	Eric J. Bruce and Animal Health

	 	80% Corporate Cash from Operations;
	Participants

	 	20% Animal Health Operating Income
	 
	 	 
	Dennis O’Brien and Meridian

	 	80% Corporate Cash from Operations;
	Participants

	 	20% Meridian Operating Income
	 
	 	 
	All other Participants

	 	100% Corporate Cash from Operations

 

			
	*	 	See below for details regarding the Financial Objectives.

Determination of Award Amounts

     Each EMIA Participants is eligible for a cash award (“EMIA Payout”) which is a percentage of
his or her 2009 base salary earned. An EMIA payout is calculated as follows:

			
	EMIA Payout ($) =	 	   2009 base salary earned ($)

x Weighted Financial Objective Achievement Percentage (%)

          The sections below provide further detail regarding the elements of this calculation.

2

 

Weighted Financial Objective Achievement Percentage

          An EMIA Participant’s Financial Objective Achievement Percentage is determined, for each
Financial Objective to which he or she is subject, using the table below, according to the degree
of achievement (none, threshold, target or stretch, or a prorata percentage between levels using
straight-line interpolation).

	 	 	 	 	 	 	 
	 	 	ACHIEVEMENT PERCENTAGE
	POSITION	 	THRESHOLD	 	TARGET	 	STRETCH
	President & Chief Executive Officer
	 	50%	 	100%	 	200%
	Chief Financial Officer
	 	35%	 	70%	 	140%
	Chief Commercial Officer
	 	30%	 	60%	 	120%
	President, Animal Health
	 	30%	 	60%	 	120%
	Chief Science Officer
	 	30%	 	60%	 	120%
	Chief Legal Officer
	 	30%	 	60%	 	120%
	EVP Level 1
	 	25%	 	50%	 	100%
	EVP Level 2
	 	20%	 	40%	 	80%
	[***]
	 	[***]%	 	[***]%	 	[***]%
	[***]
	 	[***]%	 	[***]%	 	[***]%
	[***]
	 	[***]%	 	[***]%	 	[***]%

          In the case of an EMIA Participant having only one Financial Objective, the Weighted Financial
Objective Achievement Percentage is equal to the Financial Objective Achievement Percentage
determined above for the one applicable Financial Objective.

          In the case of an EMIA Participant having more than one Financial Objective, the Weighted
Financial Objective Achievement Percentage is determined by calculating the average of the
Achievement Percentages of the Participant’s Financial Objectives, with each Achievement Percentage
weighted according to its proportional representation among the Participant’s overall mix of
Financial Objectives.

Limitation of Payouts

          The total payout (the “Total Payout”) under the Plan and any substantially similar cash
incentive plans employed by the Company during 2009, but not including cash incentive plans for
members of the Company’s sales force (the “2009 Cash Incentive Plans”), shall not exceed an amount
equal to the aggregate amount that would be payable to all participants in the 2009 Cash Incentive
Plans, based upon actual results, if all such participants had Financial Objective 1, as described
below, as their sole objective (the “Cash Incentive Funding Limit”). In the event that the Total
Payout would exceed the Cash Incentive Payout Limit, all individual payouts under all 2009 Cash
Incentive Plans shall be reduced by the uniform percentage necessary to reduce the Total Payout to
the Cash Incentive Funding Limit. The provisions of the prior sentence notwithstanding, the Chief
Executive Officer may determine, however, in his sole judgment, not to reduce any payout to any or
all EMIA Participants who are not Top Executives.

          In the event that the Total Payout is less than the Cash Incentive Funding Limit, the Company
shall retain the difference between the Total Payout and the Cash Incentive Funding Limit.

          No payouts shall be made under the Plan if actual Corporate Cash from Operations is less than
the Threshold Achievement Level.

3

 

Eligibility for EMIA Payout

          Payment of any EMIA shall be contingent upon the Committee’s determination that the applicable
Financial Objectives have been met by the Company, and at what achievement level these Financial
Objectives have been met. Also:

	 	a.	 	In the case of any of the Top Executives, EMIA Payouts shall be contingent upon the
Committee’s approval of the Weighted Financial Objective Achievement Percentage.
	 
	 	b.	 	In the case of all other EMIA Participants, payment of any EMIA shall be contingent
upon the determination of the Chief Executive Officer, or his designee, of the Weighted
Financial Objective Achievement Percentage.

          Other than for reasons of Death, Incapacity, Disability or Approved Retirement, an EMIA
Participant must be employed by the Company on December 31, 2009 or the EMIA Participant will
forfeit any EMIA which he or she may have otherwise qualified to receive.

          In the event of an EMIA Participant’s death on or after January 1, 2010, the EMIA shall be
paid to his or her estate. In the event of an EMIA Participant’s death on or before December 31,
2009, a prorata portion of the Participant’s target payout percentage, as indicated in the table on
page 3, reflecting the EMIA Participant’s time in service during the performance year, shall be
paid to his or her estate as soon as reasonably practicable.

          In the event of an EMIA Participant’s termination due to incapacity (as evidenced by the
judgment or decree of a court of competent jurisdiction) on the date his or her EMIA is paid by the
Company, the EMIA shall be paid to his or her legal guardian or appointed representative. In the
event of an EMIA Participant’s incapacity on or before December 31, 2009, a prorata portion of the
Participant’s target payout percentage, as indicated in the table on page 3, reflecting the EMIA
Participant’s time in service during the performance year, shall be paid to his or her legal
guardian or appointed representative as soon as reasonably practicable.

          In the event of an EMIA Participant’s termination due to Disability on or before December 31,
2009, a prorata portion of the Participant’s target payout percentage, as indicated in the table on
page 3, reflecting the EMIA Participant’s time in service during the performance year, shall be
paid to the Participant as soon as reasonably practicable.

          In the event of an EMIA Participant’s Approved Retirement on or before December 31, 2009, a
prorata portion of the Participant’s target payout percentage, as indicated in the table on page 3,
reflecting the EMIA Participant’s time in service during the performance year, shall be paid to the
Participant as soon as reasonably practicable.

Timing of EMIA Payout

          The payment of all EMIA Payouts, if any, will be made between January 1 and March 15, 2010.

4

 

Tax Matters

          All EMIA payments are subject to applicable state, federal, local and other tax withholding
requirements.

          To the maximum extent possible, all EMIA Payouts are intended to be “qualified
performance-based compensation” in accordance with Treas. Reg. § 1.162-27(e) and shall be
interpreted and administered as such unless the Committee determines that it is in the best
interests of the Company not to adhere to the requirements of 162(m) of the Internal Revenue Code
of 1986, as amended (the “Code”), and Treas. Reg. § 1.162-27.

Other Matters

          The Committee, in its discretion, may reduce or eliminate any EMIA Payout in the event it
determines it is in the best interests of the Company to do so for reasons including, without
limitation, financial distress of the Company, administrative difficulties or that the EMIA Payout
is nondeductible by the Company under the Internal Revenue Code. The reduction of one or more EMIA
Payouts shall not increase the EMIA Payout of any other EMIA Participant.

          The Committee may, at any time, amend or terminate this EMIA program. The Board of Directors
of the Company, in its discretion, may, at any time, withdraw the Committee’s authority over this
EMIA program.

          The grant of an EMIA shall in no way be construed or interpreted to establish or guarantee a
term of employment and does not change the “at-will” or other status of any person employed by the
Company.

          The terms and conditions of this EMIA program are, in their entirety, set forth in this
document and the EMIA documents pertaining to a specific EMIA Participant. Once established, the
Financial Objectives may only be altered by valid written notice to that effect from the Committee,
as described in the section above entitled “Approval of Objectives”. Any oral representation or
writing not authorized and approved by the Committee shall be void and of no effect, and shall not
be binding on the Company or the Committee.

5

 

Financial Objectives

          The time period for the measurement of performance of the Financial Objectives is January 1
through December 31, 2009. In the event that achievement of a Financial Objective is greater than
Threshold but less than Stretch, payout percentages applicable to the Financial Objective will be
prorated to reflect actual achievement (e.g., actual Corporate Cash from Operations), using
straight-line interpolation between the two adjacent achievement levels.

Financial Objective 1: Cash From Operations

	 	 	 	 	 	 	 
	 	 	ACHIEVEMENT LEVEL
	 	 	Threshold	 	Target	 	Stretch
	Corporate Cash from Operations (1)
	 	$[***]
	 	$[***]
	 	$[***]

 

			
	(1)	 	[***]

Financial Objective 2: Total Prescriptions and/or Units from Promoted Products

     The Achievement Level for this item shall be determined by calculating the average achievement
level for the Company’s promoted products, as provided below.

     [***]:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	ACHIEVEMENT LEVEL
	Product	 	Metric (2)	 	Weight	 	Threshold	 	Target	 	Stretch
	[***]
	 	[***]
	 	[***]%
	 	[***]
	 	[***]
	 	[***]

 

			
	(2)	 	[***]

     [***]:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	ACHIEVEMENT LEVEL
	Product	 	Metric (3)	 	Weight	 	Threshold	 	Target	 	Stretch
	[***]
	 	[***]
	 	[***]%
	 	[***]
	 	[***]
	 	[***]

 

			
	(3)	 	[***]

     [***].

Financial Objective 3: Animal Health Operating Income

	 	 	 	 	 	 	 
	 	 	ACHIEVEMENT LEVEL
	 	 	Threshold	 	Target	 	Stretch
	Animal Health Operating Income (4)
	 	$[***]
	 	$[***]
	 	$[***]

 

			
	(4)	 	[***].

Financial Objective 4: Meridian Medical Technologies, Inc. Operating Income

6

 

	 	 	 	 	 	 	 
	 	 	ACHIEVEMENT LEVEL
	 	 	Threshold	 	Target	 	Stretch
	Meridian Medical Technologies, Inc. 

Operating Income (5)
	 	$[***]
	 	$[***]
	 	$[***]

 

			
	(5)	 	[***].

7

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