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EXHIBIT 10.1
KING PHARMACEUTICALS, INC.
SEVERANCE PAY PLAN: TIER I
(EFFECTIVE MARCH 15, 2005)
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TABLE OF CONTENTS
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Page
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Section 1. Purpose Of The
Plan.......................................................1
Section 2. Eligible
Executives.......................................................1
Section 3.
Definitions...............................................................1
Section 4. Severance Pay And
Severance Benefits......................................5
Section 5. Payment of Severance
Pay and Severance Benefits...........................7
Section 6. Application Of Code
Sections 280G and 4999................................7
Section 7. Waiver, Release and
Non-Solicitation, Noncompete and Nondisclosure
Agreement.................................................................8
Section 8. Non-Solicitation,
Non-Compete and Nondisclosure of Confidential
Information...............................................................8
Section 9. Plan
Administration......................................................10
Section 10. Claims
Procedure.........................................................10
Section 11. No
Assignment............................................................11
Section 12. No Employment
Rights.....................................................11
Section 13. Plan
Funding.............................................................12
Section 14. Survival of Plan Upon a
Change in Control................................12
Section 15. Applicable
Law...........................................................12
Section 16.
Severability.............................................................13
Section 17. Plan
Year................................................................13
Section 18. Amendment/Termination of
Plan............................................13
Section 19. Recovery of Payments Made by
Mistake.....................................13
Section 20. Representations Contrary to
the Plan.....................................13
Section 21. Company
Property.........................................................14
Section 22.
Cooperation..............................................................14
Section 23. Miscellaneous
Provisions.................................................14
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KING PHARMACEUTICALS, INC.
SEVERANCE PAY PLAN: TIER I
Effective as of March 15, 2005, King
Pharmaceuticals, Inc. (sometimes
hereinafter referred to as the "Company")
has 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. The Plan
is an "employee pension benefit plan"
within the meaning of ERISA. The Plan is
maintained, however, for a select group of
management or highly compensated
employees and, therefore, it is intended
that the Plan is exempt from Parts 2, 3
and 4 of Title I 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, in the form of 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 listed
on
Exhibit 1 hereto, 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
Securities Exchange Act of 1934
("Key Executive Officers"), and each
Executive Vice President, Level 1 or Level
2 whose employment is terminated due to a
Qualifying Separation.
Section 3. Definitions
(a) "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;
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(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.
(b) "Change in Control" of the Company shall, in the case of any
vested
or unvested benefit under this Plan which
is subject to the provisions of Code
Section 409A, have the meaning prescribed
by Treasury Regulations or other
applicable Treasury Department guidance. In
the case of any vested or unvested
benefit which is not subject to Code
Section 409A, Change in Control 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 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
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(iv) during any consecutive two-year period, individuals who at
the
beginning of such period constituted the Board of Directors of
the
Company (together with any new directors whose election by the
shareholders of the Company was approved by a vote of 66 2/3% of
the
directors then still in office who were either directors at the
beginning of such period or whose election or nomination for
election
was previously so approved) cease for any reason to constitute
a
majority of the Board of Directors of the Company then in
office.
A "Change in Control"
shall be deemed to have occurred and be effective
as of the effective date of any transaction resulting in a Change
in
Control as hereinabove defined.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended
from time to time.
(d) "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 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 Executive
shall continue to be subject to the terms
of this provision as to all other
Confidential Information.
(e) "Disability" shall mean (i) the 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 at
least twelve (12) months, to engage in any
substantial gainful activity, or (ii)
as a result 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 at least twelve (12) months has
received income replacement benefits
under an accident and health plan of the
Company for its employees.
(f) "Good Reason" shall mean any one or more of the following:
(i) Implementation of a material demotion or diminution in the
nature or status of the Executive's authorities, duties,
responsibilities, reporting relationships, title and/or position
from
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
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corporations which includes the Company immediately prior to the
Change
in Control as compared to the individual's position in the
overall
controlled group of corporations which includes the Company
immediately
after the Change in Control, other than any such material change
that
is remedied by the Company within ten (10) days after receipt
of
written notice thereof given by the Executive;
(ii) Failure to pay promptly any material compensation when
due;
(iii) Reduction in the rate of annual base salary without the
Executive's consent;
(iv) Material breach of any employment contract or other
agreement as to the terms and conditions of employment;
(v) Requiring the Executive to be based at a work location in
excess of fifty (50) miles from the current location of the
Executive's
principal job location or office.
The Executive's right to effect a Separation from Service for
Good
Reason must be exercised by the Executive
within six (6) months after the date
on which the Executive knows or reasonably
should have known of the occurrence
that constitutes Good Reason, otherwise the
right to a Separation from Service
on the basis of that occurrence shall be
deemed to have been waived.
The Executive's right to a Separation from Service for Good
Reason
shall not be affected by the Executive's
temporary incapacity due to a physical
or mental/psychological condition. However,
a Disability as herein defined will
not qualify as a Good Reason unless
accompanied by one or more "good reasons"
hereinabove listed.
(g) "Good Reason Without a Change in Control" shall mean requiring
the
Executive to be based at a work location in
excess of fifty (50) miles from the
current location of the Executive's
principal job location or office.
(h) "Management Shareholder" shall mean a Person designated as
an
Executive Officer of the Company pursuant
to the rules and regulations of the
Exchange Act.
(i) "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
Executive; or actually received by
the Company or Executive after being
transmitted by telefacsimile ("fax") to the
Company or Executive; or, deposited in the
United States mail, certified or
registered, postage prepaid, return receipt
requested, addressed to the Company
or Executive at their respective last known
principal business address, and
thereafter actually received by the Company
or Executive. The burden to prove
timely delivery to and receipt by the other
party shall be on the party giving
notice.
(j) "Person" shall mean any individual, corporation,
partnership,
association, joint-stock company, trust,
unincorporated organization, or a
government or political subdivision
thereof.
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(k) "Plan Administrator" shall mean the Company, or the
person(s),
committee or other group designated by the
Company to serve as Plan
Administrator.
(l) "Qualifying Separation" shall mean the Executive's Separation
from
Service with the Company (A) within
twenty-four (24) months following the date
on which a Change in Control occurs, for
Good Reason, provided the Executive has
first given Notice to the Company of the
specified reasons for Separation from
Service and that the Company has not
remedied the situation within ten (10) days
after the Company's receipt of the Notice;
(B) as a result of Good Reason
Without a Change in Control; (C) without
Cause and not following a Change in
Control; or (D) without Cause within
twenty-four (24) months following the date
on which a Change in Control occurs.
A Qualifying Separation shall not include a Separation from Service
by
reason of Cause or of the Executive's
voluntary resignation, retirement, death
or Disability.
(m) "Separation from Service" shall mean cessation of services to
the
Company and/or its affiliates, determined
in accordance with guidance issued by
the Secretary of the Treasury for purposes
of applying Code Section 409A.
(n) "Severance Benefits" shall mean those benefits payable to
an
eligible Executive other than Severance
Pay, as provided in Section 4(b) of the
Plan.
(o) "Severance Pay" shall mean the severance pay payable to an
eligible
Executive who experiences a Separation from
Service as a result of a Qualifying
Separation. Severance pay will be
determined in accordance with Section 4(a) of
the Plan.
Section 4. Severance Pay And Severance Benefits
In the event of an eligible Executive's Separation from Service as
a
result of a Qualifying Separation, and the
Executive provides the Company with
an enforceable Waiver, Release and
Non-Solicitation, Noncompete and
Nondisclosure Agreement, as determined
under Section 7, in a form substantially
the same as that attached as Exhibit 2 to
this Plan and acceptable to the
Company in its sole discretion, the Company
shall pay to or on behalf of the
Executive and provide the Executive the
Severance Pay and Severance Benefits
described in this Section.
(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:
(i) In the case of a Qualifying Separation described in
Section 3(l)(A) or (D):
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(1) Chief Executive Officer: Three (3) times the sum of the
current rate of annual salary plus the target bonus for the
current
year.
(2) Key Executive Officers and Executive Vice Presidents
(Level 1 and 2): Two (2) times the sum of the current rate of
annual
salary plus the target bonus for the current year.
(ii) In the case of a Qualifying Separation described in
Section
3(l)(B) or (C):
(1) Chief Executive Officer: Two (2) times the sum of the
current
rate of annual salary plus the target bonus for the current
year.
(2) Key Executive Officers and Executive Vice Presidents
(Level 1 and 2): One and one-half (1.5) times the sum of the
current
rate of annual salary plus the target bonus for the current
year.
Salary and target bonus amounts for the current year will not
be
reduced by pro-ration, based upon date of
Separation from Service (or
termination of employment), but rather will
be considered and included in full.
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 by
including, in lieu of a target bonus, any
bonus(es) actually earned by the relevant
individual during the immediately
preceding fiscal year.
(b) Severance Benefits
In the event of a Qualifying Separation, an eligible Executive
shall be
eligible to receive Severance Benefits,
consisting of continued coverage under
each welfare benefit plan (within the
contemplation of ERISA) listed on Exhibit
3 for which the Executive was eligible 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.
Such Severance Benefits shall be
provided 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; provided,
however, that the full cost of such
coverage shall be paid by the Executive,
and the Company shall reimburse the
Executive for such payment, on a grossed-up
basis for federal income tax
purposes. Such 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 is calculated, as set forth
in paragraph (a) above, exclusive of
any target bonus payment (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 Executive, or (D) the date the
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 Executive neglects,
refuses or otherwise fails to take any
action required for enrollment in such
other plan, program or other arrangement.
The Executive shall notify the Company in
writing within seven (7) days of
becoming
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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.
In addition, to the extent consistent with the existing terms of
any
equity-based incentive plan or program of
the Company, any award granted to an
affected Executive pursuant to such
equity-based plan which is not vested and
exercisable as of the date of a Qualifying
Separation shall not lapse on such
date, but shall instead be suspended.
Pending timely execution of a Waiver,
Release and Non-Solicitation, Noncompete
and Nondisclosure Agreement by the
Eligible Employee, no such award shall vest
or become exercisable. Upon the
timely execution of a Waiver, Release and
Non-Solicitation, Noncompete and
Nondisclosure Agreement by an Eligible
Employee for whom a suspended award is so
established, all rights of such Executive
under each such suspended 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 award if such award had
been vested on the date of the Qualifying
Separation. In the event of a failure
by an Executive for whom a suspended award
is so established to timely execute a
Waiver, Release and Non-Solicitation,
Noncompete and Nondisclosure Agreement,
all suspended rights of such Executive
under each such suspended award shall
lapse as of the date of the Qualifying
Separation. To the extent not
inconsistent with the underlying plan, each
such award is deemed amended
accordingly.
Section 5. Payment of Severance Pay and Severance Benefits
Severance Pay will be paid in a lump sum following the eligible
Executive's Qualifying Separation. However
any Severance Pay and Severance
Benefits shall become payable or available
only after the seven (7) day
revocation period for a signed Waiver and
Release Agreement has passed. Payment
shall be made as soon as is
administratively practicable after the expiration of
such revocation period, and in no event
later than March 15 of the calendar year
after the calendar year of the Qualifying
Separation. All taxes and other
deductions required by law, and any
additional sums owing the Company shall be
deducted from Severance Pay and Severance
Benefits. The benefit which accrues
under this Plan, if any, is net of any such
amount other than taxes and other
deductions required by law.
Section 6. Application Of Code Sections 280G and 4999
If any portion of the Severance Pay and Severance Benefits or any
other
payment under this Plan or under any other
agreement with, or plan of, the
Company which is paid to an 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 Executive under
this Plan shall not be reduced as a
result, and (ii) the severance payment to
the Executive shall be recomputed to a
"grossed up" level sufficient to enable the
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 grossed up
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payment shall be in a sin
