pre14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by
the Registrant ý
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Check the appropriate box:
ý Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
King Pharmaceuticals, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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King
Pharmaceuticals,®
Inc.
501 Fifth Street
Bristol, TN 37620
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Brian A.
Markison
Chairman of the Board, President
and Chief Executive Officer
April 15,
2010
To the Shareholders of
King Pharmaceuticals,
Inc.:
You are cordially invited to attend the annual meeting of
shareholders of King Pharmaceuticals, Inc., to be held on
May 26, 2010 at 9:00 a.m. Eastern Daylight Time,
at The Umstead Hotel, 100 Woodland Pond, Cary, North Carolina
27513. At the meeting, you will be asked to:
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elect ten directors to serve until the 2011 annual meeting of
shareholders or until their successors have been duly elected
and qualified;
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consider and act upon a proposed amendment to our Third Amended
and Restated Charter providing for a majority voting standard in
uncontested elections of directors and eliminating unnecessary
provisions related to our previously classified Board of
Directors;
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reapprove the performance goals listed within our Incentive
Plan, which originally were approved by our shareholders in 2005;
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ratify the appointment of PricewaterhouseCoopers LLP as the
companys independent registered public accounting firm for
the fiscal year ending December 31, 2010;
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consider and act upon a non-binding shareholder proposal
requesting that our Board of Directors take steps to eliminate
supermajority voting provisions applicable to shareholders, if
the proposal is properly presented at the meeting; and
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consider and act upon any other matters which properly come
before the annual meeting or any adjournment of the meeting.
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Securities and Exchange Commission rules allow us to furnish
proxy materials to our shareholders through the Internet. We are
pleased to take advantage of these rules and believe that they
enable us to provide our shareholders with the information that
they need while lowering the cost of delivery and reducing the
environmental impact of our annual meeting.
In connection with the annual meeting, on or about
April 15, 2010, we mailed you a Notice of Availability of
Proxy Materials, which provides instructions on how to obtain a
proxy statement and a form of proxy through the Internet or, if
you wish, in printed form.
Your vote is very important. Whether or not you plan to attend
the meeting, please promptly vote using the available Internet
or telephone voting systems or, if you have obtained a printed
proxy card, by completing, signing, dating and returning your
proxy card by mail. Instructions for using these alternatives
are enclosed. I urge you to vote as soon as possible.
Detailed information relating to Kings activities and
operating performance during 2009 is contained in our annual
report. The annual report is available for viewing at the
website indicated on the Notice of Availability of Proxy
Materials, but it is not a part of the proxy soliciting
material. If you would like to obtain a printed copy of the
annual report, please see the instructions contained in the
Notice of Availability of Proxy Materials.
Very truly yours,
Brian A. Markison
Chairman of the Board,
President and Chief Executive Officer
TABLE OF
CONTENTS
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KING
PHARMACEUTICALS, INC.
501 Fifth Street
Bristol, Tennessee 37620
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 26, 2010
The annual meeting of shareholders of King Pharmaceuticals, Inc.
will be held on Wednesday, May 26, 2010 at 9:00 a.m.,
Eastern Daylight Time, at The Umstead Hotel, 100 Woodland Pond,
Cary, North Carolina 27513, for the following purposes:
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1.
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Election of Directors. To elect ten directors
to serve until the 2011 annual meeting of shareholders, or until
their successors have been duly elected and qualified.
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Approval of Charter Amendment. To consider
and act upon a proposed amendment to our Third Amended and
Restated Charter providing for a majority voting standard in
uncontested elections of directors and eliminating unnecessary
provisions related to our previously classified Board of
Directors.
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Reapproval of Incentive Plan Performance
Goals. To reapprove the performance goals listed
within our Incentive Plan, which originally were approved by our
shareholders in 2005.
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Ratification of Independent Registered Public Accounting
Firm. To ratify the appointment of
Pricewater-houseCoopers LLP as the companys independent
registered public accounting firm for the fiscal year ending
December 31, 2010.
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Consideration of Shareholder Proposal. If
properly presented at the meeting, to consider and act upon a
non-binding shareholder proposal requesting that our Board
of Directors take steps to eliminate supermajority voting
provisions applicable to shareholders.
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Other Business. To transact such other
business as may properly come before the meeting or any
adjournment of the meeting.
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Only those shareholders of record at the close of business on
March 30, 2010 are entitled to notice of, and to vote at,
the annual meeting and any adjournment thereof. On that day,
249,609,987 shares of our common stock were outstanding.
Each share entitles the holder thereof to one vote.
BY ORDER OF THE BOARD OF DIRECTORS
James W. Elrod
Chief Legal Officer and Secretary
April 15, 2010
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the meeting, please
promptly vote using the available Internet or telephone voting
systems or, if you have obtained a printed proxy card, by
calling the telephone number that appears on your proxy card or
by completing, signing, dating and returning your proxy card by
mail. Instructions for using these alternatives are enclosed. If
you decide to attend the annual meeting, you may revoke your
proxy and personally cast your vote.
ADMISSION
TO THE ANNUAL MEETING
If you wish to attend the annual meeting, you will be
required to present your Notice of Availability of Proxy
Materials. You and one guest may attend the meeting. You and any
guest will also be required to present valid photographic
identification in order to enter the meeting.
i
KING
PHARMACEUTICALS, INC.
501 Fifth Street
Bristol, Tennessee 37620
PROXY
STATEMENT
For 2010 Annual Meeting of Shareholders
The Board of Directors of King Pharmaceuticals, Inc.
(King or the company) requests that you
allow your shares of common stock to be represented at the 2010
annual meeting of shareholders by the proxies named on the proxy
card available on the Internet or, upon your request, that has
been mailed to you. The Notice of Availability of Proxy
Materials was sent to you in connection with this request and
was mailed to all shareholders beginning on or about
April 15, 2010.
INFORMATION
ABOUT THE ANNUAL MEETING
Why
did you provide me this proxy statement?
We have made these proxy materials available to you through the
Internet, or, upon your request, have delivered printed versions
of these materials to you by mail. We are furnishing this proxy
statement in connection with the solicitation by our Board of
Directors of proxies to be voted at the 2010 annual meeting of
shareholders. This proxy statement, along with the accompanying
Notice of Annual Meeting of Shareholders, describes the purposes
of the meeting and the information you need to know to vote at
the meeting.
When
is the annual meeting?
The meeting will be held on Wednesday, May 26, 2010 at
9:00 a.m. Eastern Daylight Time.
Where
will the annual meeting be held?
The meeting will be held at The Umstead Hotel, 100 Woodland
Pond, Cary, North Carolina 27513.
What
items will be voted on at the meeting?
You will be voting on the following matters:
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1.
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Election of Directors. To elect ten directors
to serve until the 2011 annual meeting of shareholders, or until
their successors have been duly elected and qualified.
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2.
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Approval of Charter Amendment. To consider
and act upon a proposed amendment to our Third Amended and
Restated Charter providing for a majority voting standard in
uncontested elections of directors and eliminating unnecessary
provisions related to our previously classified Board of
Directors.
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3.
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Reapproval of Incentive Plan Performance
Goals. To reapprove the performance goals listed
within our Incentive Plan, which originally were approved by our
shareholders in 2005.
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Ratification of Independent Registered Public Accounting
Firm. To ratify the appointment of
Pricewater-houseCoopers LLP as the companys independent
registered public accounting firm for the fiscal year ending
December 31, 2010.
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Consideration of Shareholder Proposal. If
properly presented at the meeting, to consider and act upon a
non-binding shareholder proposal requesting that our Board
of Directors take steps to eliminate supermajority voting
provisions applicable to shareholders.
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Other Business. To transact such other
business as may properly come before the meeting or any
adjournment of the meeting.
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Who
can vote?
You are entitled to vote your shares of common stock if our
records show that you held your shares as of the close of
business on the record date, March 30, 2010. Each
shareholder is entitled to one vote for each share of common
stock held on that date. On the record date, there were
249,609,987 shares of common stock outstanding and entitled
to vote.
How do
I vote by proxy?
You may choose one of the following ways to vote by proxy:
Vote by Internet: You may vote using the
Internet site listed on the Notice of Availability of Proxy
Materials. This site will give you the opportunity to make your
selections and confirm that your voting instructions have been
followed. Internet voting procedures authenticate your identity
by use of a unique control number found on the Notice. To vote
through the Internet, you must subscribe to one of the various
commercial services that offer access to the Internet. Costs
normally associated with electronic access, such as usage and
telephone charges, will be borne by you. King does not charge
any separate fees for access to the Internet voting web site.
Vote by Telephone: Registered and beneficial
shareholders can also vote by telephone (toll-free for calls
originating in the United States). To do so, you must obtain the
voting telephone number by either visiting the Internet site
listed on the Notice of Availability Proxy Materials or by
requesting printed proxy materials. Instructions for obtaining
printed materials appear on the Notice of Availability of Proxy
Materials. You may then vote by calling the voting telephone
number, entering your unique control number (listed on your
Notice of Availability Proxy Materials) and following the simple
recorded instructions. Note that requests for printed proxy
materials must be received by May 12, 2010.
Vote by Mail: If you choose to vote by mail,
you must request printed proxy materials. Instructions for
obtaining these materials appear on the Notice of Availability
of Proxy Materials. Once you receive your proxy card, simply
mark it and then sign, date and return it in the envelope
provided. Note that requests for printed proxy materials must be
received by May 12, 2010.
If you hold your shares beneficially in street name through a
nominee (such as a bank or broker), you may be able to vote by
telephone or the Internet as well as by mail. You should follow
the instructions you receive from your nominee to vote these
shares.
How
long do I have to vote?
If you choose to cast your vote using the Internet or by
telephone, you must do so by 11:59 p.m., Eastern Daylight
Time, on Tuesday, May 25, 2010, the day before the annual
meeting. Votes submitted by mail must be received prior to the
annual meeting. If you hold your shares beneficially in street
name through a nominee, you should follow the instructions you
receive from your nominee.
What
are my voting options?
For the election of directors, you may vote for (1) all of
the nominees, (2) none of the nominees, or (3) all of
the nominees except those you designate. For the other
proposals, you may vote For or
Against or you may Abstain
from voting.
What
are the Boards recommendations?
The Board recommends that you vote:
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For the election of all of its nominees for
director.
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For the amendment to our charter to provide for a
majority voting standard in uncontested elections of
directors.
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For the reauthorization of performance goals
listed within our Incentive Plan.
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For the ratification of the appointment of
PricewaterhouseCoopers LLP as the companys independent
registered public accounting firm for the fiscal year ending
December 31, 2010.
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Against the non-binding shareholder proposal
requesting that our Board of Directors take steps to eliminate
supermajority voting provisions applicable to shareholders.
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If you return a signed proxy card but do not specify how you
want to vote your shares, we will vote them according to the
recommendations of the Board described above.
If any matters other than those set forth above are properly
brought before the annual meeting, the individuals named on your
proxy card may vote your shares in accordance with the
recommendations of management.
How do
I change or revoke my proxy?
You can change or revoke your proxy at any time before it is
voted at the annual meeting by:
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submitting another proxy in writing, by telephone or via the
Internet as of a more recent date than that of the proxy first
given,
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attending the annual meeting, where you can revoke your proxy
and vote in person, or
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sending written notice of revocation to our Assistant Secretary,
William L. Phillips III, at 501 Fifth Street, Bristol,
Tennessee 37620.
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If you choose to change or revoke your vote via the Internet or
by telephone, you must do so by 11:59 p.m., Eastern
Daylight Time, on Tuesday, May 25, 2010, the day before the
annual meeting. Changes or revocations submitted by mail must be
received prior to the annual meeting.
Will
my shares be voted if I do not vote by proxy?
If your shares are registered in your name or if you have stock
certificates, your shares will not be voted if you do not vote
at the meeting in person or as described above under How
do I vote by proxy?
If your shares are held in street name through a
nominee (such as a bank or broker) and you do not provide voting
instructions to the nominee that holds your shares, the nominee
has the discretionary authority to vote your unvoted shares on
certain matters. A broker non-vote arises when a
broker, financial institution or other holder of record that
holds shares in street name does not receive instructions from
the beneficial owner of those shares and does not have the
discretionary authority to vote on a particular item. Under
current New York Stock Exchange rules, brokers have
discretionary authority to vote on the proposal regarding the
amendment to our charter and the proposal regarding the
ratification of the appointment of our independent registered
public accounting firm. Brokers do not, however, have
discretionary authority to vote on any of the other matters
expected to be considered at the annual meeting.
We encourage you to provide voting instructions to your nominee.
Doing so will ensure that your shares will be voted in the
manner you desire.
Who
will count the votes?
A representative from Broadridge Financial Solutions, Inc. will
count the votes and serve as our inspector of election. The
inspector of election will be present at the meeting.
How
many votes are required?
If a quorum is present at the annual meeting:
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the director nominees will be elected by a plurality of the
votes cast in person or by proxy at the meeting,
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the amendment to our charter will require the approval of the
holders of at least 80% of all shares of common stock
outstanding, and
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approval of other matters submitted to the shareholders will
require that the affirmative votes of the shares of common stock
present or represented by proxy at the meeting exceed the
opposing votes.
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What
constitutes a quorum for the meeting?
A majority of the outstanding shares of common stock, present or
represented by proxy, constitutes a quorum. A quorum is
necessary to conduct business at the annual meeting. You are
part of the quorum if you have voted by proxy. Abstentions,
broker non-votes and votes withheld from director nominees count
as shares present at the meeting for purposes of
determining a quorum.
What
are the effects on the voting results of abstentions and broker
non-votes?
So long as a quorum is present, abstentions and broker non-votes
do not count in the voting result for, and will have no effect
on the result of the vote on, the proposal to elect directors,
the reauthorization of performance goals listed within our
Incentive Plan, the proposal to ratify the appointment of the
independent registered public accounting firm or the non-binding
shareholder proposal requesting the elimination of supermajority
voting requirements applicable to shareholders. Abstentions and
broker non-votes will have the effect of a vote against the
proposed charter amendment to adopt a majority voting standard
in uncontested elections of directors.
Who
pays for the solicitation of proxies?
We will pay the cost of preparing, printing and mailing material
in connection with this solicitation of proxies. In addition to
solicitation by mail, regular employees of King and paid
solicitors may make solicitations personally and by telephone or
otherwise. We will, upon request, reimburse brokerage firms,
banks and others for their reasonable
out-of-pocket
expenses in forwarding proxy materials to beneficial owners of
stock or otherwise in connection with this solicitation of
proxies. We have retained Georgeson Inc. to assist in the
solicitation for a fee of $8,000 plus reasonable
out-of-pocket
expenses.
When
are 2011 shareholder proposals due?
Proposals by shareholders to be considered for inclusion in the
materials related to solicitation of proxies by the Board of
Directors for the annual meeting in 2011 must be received by our
Assistant Secretary, William L. Phillips III, at 501 Fifth
Street, Bristol, Tennessee 37620, no later than 120 days
prior to the date that is one year from the date on which the
Notice of Availability of Proxy Materials was first mailed to
shareholders, April 15, 2010. The use of certified mail,
return receipt requested, is advised. To be eligible for
inclusion, a proposal must also comply with
Rule 14a-8
and all other applicable provisions of Regulation 14A under
the Securities Exchange Act of 1934, as amended (the
Exchange Act).
Shareholder proposals not submitted for inclusion in the Board
of Directors proxy statement but which are received not
earlier than the close of business on the 120th day and not
later than the close of business on the ninetieth day prior to
May 26, 2011, the one-year anniversary of the date of the
2010 annual meeting, may be eligible to be presented at the
meeting. In the event that the 2011 annual meeting is called for
a date that is not within 30 days before or after
May 26, 2011, notice of a shareholder proposal, to be
timely, must be received by Kings Assistant Secretary not
earlier than the close of business on the 120th day prior
to such annual meeting and not later than the close of business
on the tenth day following the date on which notice of the date
of the 2011 annual meeting is mailed or public disclosure of the
date is made. Shareholder proposals which are received outside
of these required periods will be considered untimely. The
Chairman may exclude an untimely proposal from consideration or,
if the proposal is considered, any proxy given pursuant to the
Boards solicitation of proxies will be voted in accordance
with the recommendation of management.
4
ABOUT OUR
COMPANY
King is a vertically integrated pharmaceutical company that
performs basic research and develops, manufactures, markets and
sells branded prescription pharmaceutical products and animal
health products. Our branded prescription pharmaceuticals
include neuroscience products (primarily pain medicines),
hospital products, and legacy brands, all of which are for use
in humans. Our auto-injector business manufactures acute care
medicines for use in humans that are delivered using an
auto-injector. The animal health business of our wholly-owned
subsidiary, Alpharma Inc., is focused on medicated feed
additives and water-soluble therapeutics primarily for poultry,
cattle, and swine.
Our corporate strategy is focused on specialty markets,
particularly specialty-driven branded prescription
pharmaceutical markets. We believe our target markets have
significant potential and our organization is aligned to focus
on these markets. Our growth in specialty markets is achieved
through both acquisitions and organic growth. Our strategy
focuses on growth through the acquisition of novel branded
prescription pharmaceutical products and technologies that we
believe complement the commercial footprint we have established
in the neuroscience and hospital markets. We strive to be a
leader in developing and commercializing innovative,
clinically-differentiated therapies and technologies in these
target, specialty-driven markets. We may also seek company
acquisitions that add commercialized products or products in
development, technologies or sales and marketing capabilities to
our existing platforms or that otherwise complement our
operations. We also have a commitment to research and
development and advancing the products and technologies in our
development pipeline.
We work to achieve organic growth by maximizing the potential of
our currently marketed products through sales and marketing and
product life-cycle management. By product life-cycle
management, we mean the extension of the economic life of
products, including seeking and obtaining necessary governmental
approvals, by securing from the U.S. Food and Drug
Administration additional approved uses for our products,
developing and producing different strengths, producing
different package sizes, developing new dosage forms, and
developing new product formulations.
We market our branded prescription pharmaceutical products,
primarily through a dedicated sales force, to general/family
practitioners, internal medicine physicians, neurologists, pain
specialists, surgeons and hospitals across the United States and
in Puerto Rico.
Through a team of internal sales professionals, our
auto-injector business markets a portfolio of acute care
auto-injector products to the pre-hospital emergency services
market, which includes U.S. federal, state and local
governments, public health services, emergency medical personnel
and first responders and approved foreign governments.
The animal health products of our wholly-owned subsidiary
Alpharma Inc. are marketed through a staff of trained sales and
technical service and marketing employees, many of whom are
veterinarians and nutritionists. Sales offices are located in
the U.S., Europe, Canada, Mexico, South America and Asia.
5
ABOUT OUR
MANAGEMENT TEAM
King is led by Brian A. Markison, who serves as our Chairman of
the Board, President and Chief Executive Officer. In addition to
Mr. Markison, whose detailed biography appears on page 8,
the following individuals serve as Kings executive
leadership team.
Joseph Squicciarino, age 54, has served as
Kings Chief Financial Officer since June 2005. Prior to
joining King, Mr. Squicciarino was Chief Financial
Officer North America for Revlon, Inc., beginning in
March 2005. From February 2003 until March 2005 he served as
Chief Financial Officer International for Revlon
International, Inc. He held the position of Group Controller
Pharmaceuticals Europe, Middle East, Africa with
Johnson & Johnson from October 2001 until October
2002. He held a variety of positions with the Bristol-Myers
Squibb Company and its predecessor, the Squibb Corporation, from
1979 until 2001, including Vice President Finance, International
Medicines; Vice President Finance, Europe
Pharmaceuticals & Worldwide Consumer Medicines; Vice
President Finance, Technical Operations; and Vice President
Finance, U.S. Pharmaceutical Group. Mr. Squicciarino
also serves on the Board of Directors of Zep, Inc., a
publicly-held company. He is a Certified Public Accountant, a
member of the New Jersey Society of Certified Public Accountants
and a member of the American Institute of Certified Public
Accountants. Mr. Squicciarino graduated from Adelphi
University in 1978 with a Bachelor of Science degree in
Accounting.
Stephen J. Andrzejewski, age 44, has served
as Chief Commercial Officer since October 2005. He was
previously Corporate Head, Commercial Operations, commencing in
May 2004. Prior to joining King, Mr. Andrzejewski was
Senior Vice President, Commercial Business at Endo
Pharmaceuticals Inc., starting in June 2003. He previously
served in various positions with Schering-Plough Corporation
beginning in 1987, including Vice President of New Products and
Vice President of Marketing, and had responsibility for
launching the
Claritin®
product. Mr. Andrzejewski graduated cum laude from Hamilton
College with a Bachelor of Arts degree in 1987 and in 1992
graduated from New York Universitys Stern School of
Business with a Master of Business Administration degree.
Frederick Brouillette, Jr., age 59, has
served as Corporate Compliance Officer since August 2003. He was
Executive Vice President, Finance from January 2003 until August
2003 and, prior to that, Vice President, Risk Management
beginning in February 2001. Before joining King,
Mr. Brouillette, a Certified Public Accountant, was with
PricewaterhouseCoopers LLP for 4 years, serving most
recently in that firms Richmond, Virginia office providing
internal audit outsourcing and internal control consulting
services. He was formerly a chief internal audit executive for
two major public corporations and served for 12 years in
the public accounting audit practice of Peat, Marwick
Mitchell & Co., the predecessor firm to KPMG.
Mr. Brouillette is a member of the Virginia Society of
Certified Public Accountants, the American Institute of
Certified Public Accountants and the Institute of Internal
Auditors. He graduated with honors from the University of
Virginias McIntire School of Commerce in 1973 with a
Bachelor of Science degree in Accounting.
Eric J. Bruce, age 53, has served as
President, Alpharma Animal Health since February 2009. He was
the Chief Technical Operations Officer from June 2005 until
February 2009. Prior to joining King, Mr. Bruce was Vice
President of Operations for Mallinckrodt Pharmaceuticals, a
position he had occupied since 2000. Previously, he was Vice
President of Manufacturing for Kendall Health Care from 1997
until 2000, and from 1996 until 1997 he held various positions
with INBRAND, including that of Senior Vice President of
Manufacturing. Mr. Bruce graduated from the Georgia
Institute of Technology in 1978 with a Bachelor of Science
degree in Industrial Management.
Eric G. Carter, M.D., Ph.D., age 58, has
served as Kings Chief Science Officer since January 2007.
Prior to joining King, Dr. Carter held several positions
with GlaxoSmithKline commencing in 1999, most recently as Vice
President and Global Head, Clinical Development and Medical
Affairs, Gastroenterology, R&D. His earlier experience at
GlaxoSmithKline included North American responsibility for
Gastroenterology and for emerging therapeutic areas.
Dr. Carter has served as a Clinical Associate Professor at
the University of North Carolina for the Division of Digestive
Diseases and Nutrition, School of Medicine. He previously held
academic positions with the University of California, where he
was responsible for establishing and directing many research
programs. After earning a bachelors degree in Biochemistry
from the University of London, Dr. Carter received his
medical degree from the University of Miami and a doctor of
philosophy degree from the University of Cambridge. He obtained
board certification from the American Board of Internal
Medicine, Gastroenterology and Clinical Nutrition and has
authored or co-authored more than 50 scientific publications.
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James W. Elrod, age 49, has served as Chief
Legal Officer since January 2009 and Secretary since May 2005.
He was General Counsel from February 2006 until January 2009 and
Acting General Counsel from February 2005 to February 2006.
Mr. Elrod previously served in various positions within
Kings Legal Department, beginning in September 2003,
including Vice President, Legal Affairs. Prior to joining King,
he served in various capacities at Service Merchandise Company,
Inc. including Vice President, Legal Department. He previously
practiced law in Nashville, Tennessee. Mr. Elrod earned a
Juris Doctor degree from the University of Tennessee and a
Bachelor of Arts degree from Berea College.
ABOUT OUR
BOARD OF DIRECTORS
ROLE OF
THE BOARD
Pursuant to Tennessee law, our business, property and affairs
are managed under the direction of our Board of Directors. The
Board has responsibility for establishing broad corporate
policies and for Kings overall performance and direction,
but is not involved in
day-to-day
operations. Members of the Board keep informed of our business
by participating in Board and committee meetings, by reviewing
analyses and reports sent to them regularly, and through
discussions with our executive officers and independent
registered public accounting firm.
OUR
DIRECTORS
We currently have ten directors, all of whom stand for election
annually.
Kevin S. Crutchfield, age 49, was appointed
as a director in February 2010. He has served as Chief Executive
Officer of Alpha Natural Resources, a supplier and exporter of
metallurgical and thermal coal, since July 2009. He previously
served as its President, beginning in January 2007, and was
appointed to its board of directors in November 2007. Prior to
that time he served as Executive Vice President since the
companys formation in November 2004. Mr. Crutchfield
has held many other senior executive positions during his tenure
in the energy industry, including service as Vice President of
El Paso Corporation, as President of Coastal Coal Company
LLC, as President and CEO of AMVEST Corporation and Chairman and
CEO of Cyprus Australia Coal Company. He also serves on the
boards of several private organizations, including the Kentucky
Coal Association, the West Virginia and Virginia Coal
Associations, the Wellmont Foundation and the Southwest Virginia
Higher Education Center. Mr. Crutchfield received a
bachelor of science degree from Virginia Polytechnic Institute
and State University and he graduated from the University of
Virginia, Colgate Darden School of Business Executive Program in
1994.
Mr. Crutchfields service as a senior executive for a
variety of companies, including his current service as Chief
Executive Officer of a growing, acquisition-oriented company,
and his experience as a director of Alpha Natural Resources,
allow him to add valuable perspectives to the discussions of our
Board and to offer advice and insight to management regarding
Kings growth.
Earnest W. Deavenport, Jr., age 72, has
served as a director since May 2000. In 2002, he retired as
Chairman of the Board and Chief Executive Officer of Eastman
Chemical Company, where he was employed in various capacities
since 1960. He was Chairman of the National Association of
Manufacturers in 1998 and is currently a member of the National
Academy of Engineering. Mr. Deavenport is also a member of
the boards of directors of Zep, Inc. and Regions Financial
Corporation, each a publicly-held company. He has served as the
Lead Director of Regions Financial Corporation and, since
April 1, 2010, serves as its Non-Executive Chairman of the
Board. Mr. Deavenport graduated from the Massachusetts
Institute of Technology with a Master of Science degree in
Management in 1985 and from Mississippi State University with a
Bachelor of Science degree in Chemical Engineering in 1960.
Mr. Deavenports experience as an executive, including
as a Chief Executive Officer, of a large and diverse company, as
well as his experience as a director of many public and private
enterprises across a range of industries, allow him to provide
invaluable guidance to our Board and management team. In
addition, his knowledge of compensation-related matters, and his
service on the compensation committees of a number of
public-company boards of directors has particularly qualified
him to serve as the chair of the Boards Compensation and
Human Resources Committee.
Elizabeth M. Greetham, age 60, has served as
a director since November 2003. She retired as the Chief
Executive Officer and President of ACCL Financial Consultants
Ltd. in December 2007, a position she held since 2004. From 1998
until 2004 she was a director of DrugAbuse Sciences, Inc. and
served as its Chief Executive Officer from August 2000
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until 2004 and as Chief Financial Officer and Senior Vice
President, Business Development from April 1999 to August 2000.
Prior to joining DrugAbuse Sciences, Inc., Ms. Greetham was
a portfolio manager with Weiss, Peck & Greer, an
institutional investment management firm, where she managed the
WPG Life Sciences Funds, L.P., which invests in select
biotechnology stocks. She was previously a consultant to F.
Eberstadt & Co. In total, Ms. Greetham has over
25 years of experience as a portfolio manager and health
care analyst in the United States and Europe. Ms. Greetham
earned a Master of Arts (Honours) degree in Economics from the
University of Edinburgh, Scotland in 1971.
Ms. Greethams detailed knowledge of the biotechnology
and pharmaceutical industries, her service as a senior executive
and her experience with and participation in business
acquisitions and combinations combine to qualify her to serve as
a director of King. Further, her extensive experience with
public-company financial analysis allows her to serve as one of
the Boards Audit Committee Financial Experts.
Philip A. Incarnati, age 56, has served as a
director since November 2006. He has served as President and
Chief Executive Officer of McLaren Health Care Corporation, an
integrated health care system, since 1989. Before joining
McLaren, Mr. Incarnati held top-level executive positions
with the Wayne State University School of Medicine, Detroit
Receiving Hospital and University Health Center, and Horizon
Health System. Mr. Incarnati also serves on the board of
Medical Staffing Network, Inc., a publicly-traded company, and
on the boards of two privately-held companies, PHNS, Inc. and
Reliant Renal Care Inc. Mr. Incarnati earned both a
Bachelors Degree and a Masters Degree in management
and finance from Eastern Michigan University (EMU). He has been
a member of the EMU Board of Regents since 1992, when he was
appointed by then-Michigan Governor John Engler, serving as its
Chairman from 1995 until 2005.
Mr. Incarnati has served in many healthcare-related
executive positions throughout his career, and his long service
as President and Chief Executive Officer of a health care system
has equipped him with detailed knowledge of the operations of a
complex entity. Further, Mr. Incarnatis ability to provide
to Kings Board and its management the perspectives of
healthcare providers and administrators is important in the
development and review of our strategic plans.
Gregory D. Jordan, Ph.D., age 58, has
served as a director since June 2001. He has served as President
of King College in Bristol, Tennessee since 1997, having joined
the King College faculty in 1980. He received his Bachelor of
Arts degree from Belhaven College in 1973; his Master of Arts
and Divinity degrees from Trinity Evangelical Divinity School in
1976 and 1977, respectively; his Doctorate in Hebraic and
Cognate Studies from Hebrew Union College Jewish Institute of
Religion in 1987; and his Master of Business Administration
degree from the Babcock Graduate School of Management at Wake
Forest University in 2004.
Dr. Jordan has overseen a significant expansion of the
scope of the operations of King College during his tenure as
President, and he is thus able to offer valuable guidance
concerning the management of significant organizational growth,
development and governance. He is also closely connected with
the Bristol, Tennessee / Virginia area, the location
of the Companys corporate headquarters and the work
location of many of its employees.
Brian A. Markison, age 50, was elected as
Chairman of the Board in May 2007. He has served as President
and Chief Executive Officer and a director since July 2004. He
joined King as Chief Operating Officer and served in that
position from March 2004 until July 2004. Previously,
Mr. Markison held various positions with Bristol-Myers
Squibb Company beginning in 1982, most recently as President of
Bristol-Myers Squibbs Oncology, Virology and Oncology
Therapeutics Network businesses. Between 1998 and 2001, he
served variously as Bristol-Myers Squibbs Senior Vice
President, Neuroscience/Infectious Disease; President,
Neuroscience/Infectious Disease/Dermatology; and Vice President,
Operational Excellence and Productivity. He also held various
sales and marketing positions. Mr. Markison is a member of
the Board of Directors of Immunomedics, Inc., a publicly-held
corporation. He graduated from Iona College in 1982 with a
Bachelor of Science degree.
Mr. Markisons intimate knowledge of Kings
operations through his service as its Chief Executive Officer,
and the experience gained during the many and varied executive
positions he has held throughout his career in the
pharmaceutical industry, make him an essential member of
Kings Board and a vital interface between Kings
management and the Board.
R. Charles Moyer, Ph.D., age 64,
has served as a director since December 2000. Dr. Moyer
presently serves as Dean of the College of Business at the
University of Louisville, a position he has held since August
2003. He is Dean Emeritus of the Babcock Graduate School of
Management at Wake Forest University, having served as Dean from
1996 until his retirement from this position in August 2003, and
as a professor from 1988 until 2005. Dr. Moyer held the
GMAC Insurance Chair of Finance at Wake Forest University. Prior
to joining the faculty at Wake Forest in 1988, Dr. Moyer
was
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Finance Department Chairman at Texas Tech University.
Dr. Moyer earned his Doctorate in Finance and Managerial
Economics from the University of Pittsburgh in 1971, his Master
of Business Administration degree from the University of
Pittsburgh in 1968 and his Bachelor of Arts degree in Economics
from Howard University in 1967.
Dr. Moyers career-long experience with matters of
business and finance informs the Boards consideration of
potential strategic transactions, many of which involve complex
financing arrangements. In addition, his service as a department
chair at two major universities has prepared Dr. Moyer not
only for service as chair of Kings Audit Committee but
also as one of its Audit Committee Financial Experts.
D. Greg Rooker, age 62, has served as a
director since October 1997. Mr. Rooker is the former owner
and President of Family Community Newspapers of Southwest
Virginia, Inc., which consisted of six community newspapers and
a national monthly motor sports magazine. He retired from this
position in 2000. He is a co-founder of The Jason Foundation and
Brain Injury Services of SWVA, Inc., each a non-profit
organization providing services to brain injury survivors.
Mr. Rooker serves as Secretary/Treasurer of The Jason
Foundation and as a member of the Board of Directors of Brain
Injury Services of SWVA, Inc. Mr. Rooker graduated from
Northwestern University with a degree in Journalism in 1969.
Mr. Rooker offers to Kings Board the knowledge and
experience gained from many years of owning and operating his
own business. Further, through his charitable efforts following
retirement, he has assisted numerous brain-injury patients in
receiving care to which they may not have otherwise obtained
access. This experience provides Mr. Rooker with the necessary
expertise to advise Kings Board and management regarding
the perspectives of patients who may use, and health care
providers who may prescribe, Kings products.
Derace L. Schaffer, M.D., age 62, was
appointed as a director in February 2010. Dr. Schaffer has
served as Chief Executive Officer of The Lan Group, a venture
capital firm he founded that specializes in healthcare and high
technology investments, since 1990. He is also the founder of
Partners Imaging, L.P. and has served as its Chairman since its
formation in March 2005. From April 2005 until August 2007,
Dr. Schaffer served as Vice Chairman and Chief Executive
Officer of Healthcare Acquisition Corporation, a publicly-held
company, and he continues to serve as a member of the board of
directors of the publicly-held PharmAthene, Inc., which was
acquired by Healthcare Acquisition Corporation in 2007. He also
currently serves as a director of another publicly-held company,
American Caresource Holdings, Inc., and as a director of several
privately-held companies, including Careguide, Inc., Source
Medical Solutions and Partners Imaging. He has previously served
as a director or executive of numerous healthcare companies,
including several health systems and more than ten healthcare
services and technology companies, including Allion Healthcare,
Inc., a publicly-held company. During the past 25 years,
Dr. Schaffer has founded over 15 companies,
principally focused on the life sciences, and he has often
served as a director or executive of these companies.
Dr. Schaffer received a bachelor of arts degree in Biology
from Hamilton College in 1969 and is a member of Alpha Omega
Alpha, the National Medical Honor Society. He received his
medical degree from Albany Medical College in 1973 and completed
his residency in radiology, including service as Chief Resident
in Radiology, at the Massachusetts General Hospital and Harvard
Medical School, where he also received his fellowship training.
He has held clinical professorships at both the University of
Rochester and Cornell medical schools.
Dr. Shaffer is a physician with extensive experience in
both the practice of medicine and the creation, operation and
growth of business enterprises focused on the life sciences. As
a result of his experience, Dr. Schaffer is able to advise the
Board and management not only regarding strategic and
operational business issues, but also concerning the
perspectives of physicians and other healthcare providers who
use Kings products in caring for their patients.
Ted G. Wood, age 72, has served as a director
since August 2003 and as Lead Independent Director since May
2007. Mr. Wood was the Non-Executive Chairman from May 2004
until May 2007. He is retired from The United Company in
Bristol, Virginia, where he served as Vice Chairman from January
2003 until August 2003. He previously served as President of the
United Operating Companies from 1998 to 2002. Mr. Wood was
previously a director of King from April 1997 to May 2000. From
1993 to 1994, he was President of KV Pharmaceutical Company in
St. Louis, Missouri. From 1992 to 1993, he was President of
Boehringer Mannheim Pharmaceutical Corporation in Rockville,
Maryland. From 1975 to 1991, he was employed by SmithKline
Beecham Corporation where he served as President of Beecham
Laboratories from 1988 to 1989 and Executive Vice President of
SmithKline from 1990 to 1991. Mr. Wood is a member of the
board of directors of Alpha Natural Resources, Inc., a
publicly-held corporation. He graduated from the University of
Kentucky with a Bachelor of Science degree in Commerce in 1960.
In 1986 he completed the Advanced Management Program at Harvard
University.
9
Mr. Wood has several decades of experience in the
pharmaceutical industry, much of it in senior executive
positions, and he is therefore able to offer insight and
guidance into nearly all aspects of the operations of a company
such as King. This experience, as well as his current and past
service as a director of a number of publicly-held companies,
well qualifies Mr. Wood to serve not only as director of
King but also in the roles of both Lead Independent Director and
chair of the Boards Nominating and Corporate Governance
Committee.
INDEPENDENT
AND NON-MANAGEMENT DIRECTORS
The Board has determined that all of Kings directors other
than Mr. Markison are independent from the company under
the independence standards of the New York Stock Exchange (the
NYSE) and the U.S. Securities and Exchange
Commission (the SEC).
The Boards non-management directors regularly meet
separately from the Board as a whole. Kings Corporate
Governance Guidelines provide that the Chairman of the Board, if
independent of King, shall serve as presiding director at
meetings of the non-management directors. If the Chairman is not
an independent director, then the non-management directors
annually elect one of their members to serve as Lead Independent
Director.
LEAD
INDEPENDENT DIRECTOR
Mr. Markison, Kings President and Chief Executive
Officer (CEO), was appointed as Chairman of the
Board in May 2007. It is the Boards view that
Mr. Markisons service as both Chairman and CEO is
important for effective coordination and communication between
the Board and management. Mr. Wood was elected, at the same
time as Mr. Markisons appointment as Chairman, to serve as
Lead Independent Director, and he has been re-elected to this
position each year since, most recently in May 2009.
The duties of the Lead Independent Director include: meeting
regularly with the Chairman; advising the Chairman as to an
appropriate schedule of Board meetings; consulting with the
Chairman in establishing agendas for Board meetings and
consulting with the chair of each committee in establishing
agendas for committee meetings; facilitating communications with
other members of the Board; acting as the presiding director at
meetings of the non-management directors; serving as a
non-voting member of each committee on which he does not serve
as a regular member; serving as a point of contact for
shareholders who wish to contact the Company other than through
its management; directing the provision of any materials to the
Board that he or she determines to be necessary for the
independent directors to effectively and responsibly perform
their duties; coordinating the Boards annual
self-evaluation process; and other duties as prescribed from
time to time by Kings Corporate Governance Guidelines.
COMMUNICATION
WITH THE BOARD OF DIRECTORS
Interested parties may contact the Board of Directors:
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by sending correspondence to the attention of the Assistant
Secretary, William L. Phillips III, King Pharmaceuticals, Inc.,
501 Fifth Street, Bristol, Tennessee 37620;
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by sending email to Board@kingpharm.com; or
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by calling
(888) 440-5464
and leaving a voicemail message.
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Communications should specify whether they are intended for all
directors, all non-management directors, only the Chairman, or
only the Lead Independent Director. Any message which does not
specify its intended recipients will be treated as if intended
for the entire Board. All messages will be reviewed by
Kings Legal Department and its Compliance Office and any
message deemed by either department to be substantive will be
forwarded to the intended recipients.
2009
BOARD MEETINGS AND ATTENDANCE
In 2009, the Board met ten times. All directors attended at
least 75% of the aggregate of all of the Board meetings and
meetings held by committees of which they were members.
10
BOARD
COMMITTEES
The Board has appointed an Audit Committee, a Compensation and
Human Resources Committee and a Nominating and Corporate
Governance Committee. Each member of these committees has been
determined by our Board of Directors to be independent of King
pursuant to NYSE listing standards. Each of these committees
operates pursuant to a written charter adopted by our Board of
Directors. These charters are available through our website,
www.kingpharm.com, by first choosing
Investors and then Governance. The Board
has also formed an Enterprise Risk Management Committee.
Audit Committee. The Audit Committee currently
consists of R. Charles Moyer (Chair), Elizabeth M. Greetham,
Philip A. Incarnati and D. Greg Rooker. The Audit Committee has
the authority and responsibility, among other obligations, to
select, retain, compensate, terminate and oversee the work of
our independent registered public accounting firm; to assess the
qualifications and independence of our independent registered
public accounting firm; to pre-approve auditing, audit-related
and permitted non-auditing services rendered by our independent
registered public accounting firm; to discuss with the
independent registered public accounting firm the results of the
annual audit and quarterly reviews of financial statements; to
review and evaluate managements conduct of Kings
financial reporting processes (including the development and
maintenance of systems of internal accounting and financial
control); to oversee Kings compliance with certain legal
and regulatory requirements; to oversee the performance of
Kings internal audit function; to monitor compliance with
Kings investment policy; and to make reports to the Board
periodically with respect to its work. The Board of Directors
has determined that each member of the Audit Committee meets the
independence, experience and other qualification requirements of
the NYSE and the SEC and that Dr. Moyer and
Ms. Greetham, each of whom serves on the Audit Committee,
are audit committee financial experts, as defined by
the rules of the SEC. None of the Committees members
serves on more than three public company audit committees. The
Audit Committee met five times during 2009. For additional
information regarding the Audit Committee, please see the Report
of the Audit Committee of the Board of Directors that begins on
page 13.
Compensation and Human Resources
Committee. The Compensation and Human Resources
Committee currently consists of Earnest W. Deavenport, Jr.
(Chair), Elizabeth M. Greetham, Gregory D. Jordan and Ted G.
Wood. The Committee has the authority and responsibility, among
other obligations, to establish and periodically review a
general compensation philosophy for our executive officers; to
annually review and approve the corporate goals and objectives
upon which the compensation of our CEO is based, evaluate the
CEOs performance in light of these goals and objectives
and determine the CEOs compensation; to review and approve
the recommendations of the CEO with regard to the compensation
and benefits of the executive officers; in conjunction with the
Nominating and Corporate Governance Committee, to review
annually and make recommendations to the Board with respect to
the compensation (including any equity-based compensation) of
non-employee directors; to oversee the management development
process, including an annual review of plans for executive
officer succession; and to oversee regulatory compliance with
respect to compensation matters. In 2009, the Committee was
advised with respect to executive compensation matters by an
independent outside consultant, James F. Reda &
Associates, LLC, retained by the Committee. The Compensation and
Human Resources Committee met nine times during 2009. For
additional information regarding the Compensation and Human
Resources Committee and compensation matters generally, please
see the Compensation Discussion and Analysis and related
information that begins on page 15.
Nominating and Corporate Governance
Committee. The Nominating and Corporate
Governance Committee currently consists of Ted G. Wood (Chair),
Earnest W. Deavenport, Jr., Gregory D. Jordan and R.
Charles Moyer. The Nominating and Corporate Governance Committee
has the authority and responsibility, among other obligations,
to locate, evaluate and recommend to the Board persons to be
nominated for election or appointment as directors; to recommend
to the Board a chair and members for each of the Boards
committees; to assist the Board and its committees in the
development and implementation of performance evaluation
processes; to review annually our Corporate Governance
Guidelines and recommend to the Board any changes that the
Committee determines to be necessary or desirable; to assist the
Board with the orientation of new directors and continuing
education for existing directors; in conjunction with the
Compensation and Human Resources Committee, to annually review
and make recommendations to the Board with respect to the
compensation (including equity-based compensation) of
non-employee directors; and to examine annually the independence
from King of each non-employee director and deliver to the Board
the results of its review. The Nominating and Corporate
Governance Committee met seven times during 2009.
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The Nominating and Corporate Governance Committee may consider,
in evaluating potential director nominees, any of the following
factors, or other factors, which it determines to be relevant:
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Character and integrity.
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Educational background.
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Business or professional experience, including experience with
financial statements, financial reporting, internal controls,
executive compensation, corporate governance, employee benefits,
manufacturing and regulatory issues or other relevant areas of
experience.
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Familiarity with the principal operations of publicly-traded
United States companies.
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Current or prior relationships with King or any of its
subsidiaries.
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The correlation between the candidates experience and the
Committees evaluation of the present and future needs of
the Board.
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If reviewing the qualifications of an incumbent director, the
Committee also considers the past performance of the incumbent
director.
King does not have a formal policy regarding the consideration
of diversity in identifying director nominees. However, the
Nominating and Corporate Governance Committee actively attempts
to identify and nominate candidates with a variety of
backgrounds and complementary skills so that the Board, as a
whole, will have the experience needed to oversee Kings
business.
Shareholders may recommend candidates to the Committee by
submitting a written recommendation to the Chief Legal Officer,
501 Fifth Street, Bristol, Tennessee 37620. The Chief Legal
Officer will direct all such correspondence to the Committee.
In order for a written shareholder recommendation to be
evaluated by the Committee, it must include all information
about the candidate that is required to be disclosed in a
solicitation of proxies for election of directors pursuant to
Regulation 14A under the Exchange Act. The written
recommendation must also be accompanied by the candidates
written consent to be named in a proxy statement as a nominee,
if recommended by the Committee and nominated by the Board, and
to serve as a director if appointed or elected. Additional
information about the candidate may be requested by the
Committee from time to time, either from the recommended person
or from the recommending shareholder.
The shareholder must also disclose, with the written
recommendation, the number of shares of Kings common stock
beneficially owned by the shareholder, the percentage of all
outstanding common stock which the shares represent and the
period of time the shareholder has beneficially owned the
shares. If the shareholder is part of a group of shareholders
that is making the recommendation, the shareholder must also
disclose the names of the other members of the group and, for
each member of the group, the number of shares of Kings
common stock beneficially owned by the member, the percentage of
all outstanding common stock which the shares represent and the
period of time the member has beneficially owned the shares.
Once the Committee has received all required or requested
information regarding a particular shareholder-recommended
candidate, the Committee will evaluate that candidate according
to its established evaluation practices and, based on the
results of that evaluation, will determine whether to recommend
the candidate to the Board for nomination for election or
appointment as a director.
The procedure described above does not preclude a shareholder of
record from making nominations of director candidates, provided
such nominations are in accordance with Kings bylaws as
then in effect.
From time to time, including in 2009, the Committee has retained
and paid consultants to assist it in the process of identifying
or evaluating Board candidates. No candidates have been
recommended to serve on the Board of Directors by a shareholder
or group of shareholders who beneficially owned more than 5% of
our common stock.
Enterprise Risk Management Committee. In 2009,
the Enterprise Risk Management Committee consisted of all
then-serving directors, and it was co-chaired by
Mr. Markison and Mr. Incarnati. This Committee is
responsible for oversight of Kings risk management
processes; risk assessments; risk mitigation activities; the
adoption of risk tolerances; and for reviewing the activities
and reports of managements Enterprise Risk Management
Committee. The enterprise risk management approach applied by
the Committee is designed to identify, assess, mitigate and
manage material risks, and it supports the Boards
corporate governance goals and the efforts of management to
achieve strategic objectives.
12
BOARD
COMMITTEE
REPORTS
REPORT OF
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The following Report of the Audit Committee does not
constitute soliciting material and should not be deemed filed or
incorporated by reference into any other company filing under
the Securities Act of 1933 or the Exchange Act, except to the
extent the company specifically incorporates this Report by
reference therein.
The Audit Committee is typically appointed by the Board
immediately following the annual meeting of shareholders. Since
the time of the May 2009 annual meeting, R. Charles Moyer
(Chair), Elizabeth M. Greetham, Philip A. Incarnati and D. Greg
Rooker have served on the Audit Committee. The Board of
Directors has determined that each member of the Audit Committee
meets the independence, experience and other qualification
requirements of the NYSE and the SEC. None of the
Committees members serves on more than three public
company audit committees. The Audit Committee operates pursuant
to a written charter adopted by the Board of Directors which is
available on our website, www.kingpharm.com.
Management is responsible for internal controls and the
financial reporting process. The companys independent
registered public accounting firm is responsible for performing
an audit of our financial statements and companys systems
of internal control, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), and
for expressing an opinion about those statements and controls
based upon its audit. The Audit Committee, on behalf of the
Board, monitors and reviews the performance of the independent
registered public accounting firm and the quality and integrity
of internal accounting, auditing and financial reporting
practices. The Audit Committees other chief duties include:
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exercising sole authority to retain, compensate, terminate and
oversee the work of the companys independent registered
public accounting firm,
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pre-approving audit, audit-related and permitted non-audit
services rendered by the companys independent registered
public accounting firm,
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reviewing and discussing with management and the independent
registered public accounting firm the annual audited financial
statements and quarterly unaudited financial statements, and
determining whether to recommend to the Board that the audited
financial statements be included in our Annual Report on
Form 10-K,
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discussing earnings press releases, as well as financial
information and earnings guidance provided to analysts or rating
agencies, and reviewing such information, to the extent
reasonably practicable, prior to its release or distribution,
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reviewing and approving the written charter and annual work
plans of the Compliance Office and reviewing the plans for, and
results of, internal audits,
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receiving reports from the Corporate Compliance Officer of any
allegation regarding accounting, internal control or auditing
matters or any other substantial compliance issue,
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establishing and maintaining hiring policies with respect to
employees or former employees of the independent auditors,
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assessing the independent registered public accounting
firms independence from the company, and
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periodically reporting to the Board regarding the Audit
Committees activities.
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During 2009, the Audit Committee met five times and regularly
held separate executive sessions with the independent registered
public accounting firm, PricewaterhouseCoopers LLP
(PricewaterhouseCoopers), and also with the Chief
Financial Officer, the Corporate Compliance Officer, the Vice
President for Internal Audit and among the Audit Committee
members. There were also numerous informal meetings and
communications among the Chair, various Audit Committee members,
the independent registered public accounting firm and members of
management.
13
The Audit Committee has reviewed and discussed with management
the companys audited financial statements for the year
ended December 31, 2009. The Audit Committee has also
discussed with PricewaterhouseCoopers the matters required to be
discussed by Statement on Auditing Standards No. 61,
(Communication with Audit Committees) as amended, as
adopted by the Public Company Accounting Oversight Board (United
States) in Rule 3200T, and, with and without management
present, discussed and reviewed the results of the independent
registered public accounting firms examination of
Kings financial statements and internal control over
financial reporting. The Audit Committee has also discussed with
the independent registered public accounting firm the quality of
Kings accounting policies.
The Audit Committee has obtained from PricewaterhouseCoopers a
formal written statement describing all relationships between
that firm and King that might bear on the accounting firms
independence. This statement conforms to Independence Standards
Board Standard No. 1, as amended, Independence
Discussions with Audit Committees as adopted by the Public
Company Accounting Oversight Board (United States) in
Rule 3600T. The Audit Committee has also discussed with
PricewaterhouseCoopers any relationships that may impact its
objectivity and independence. The Audit Committee has also
considered whether provision of the services described under the
section Audit Fees is compatible with maintaining
the independence of the independent registered public accounting
firm.
In October 2005, as part of the settlement of a government
pricing investigation, the company entered into a five-year
corporate integrity agreement (the CIA) with the
Office of Inspector General of the United States Department of
Health and Human Services. In December 2005, the Audit Committee
approved managements recommendation to appoint
PricewaterhouseCoopers to serve as the independent review
organization (IRO) in connection with the
requirements of the CIA. PricewaterhouseCoopers acted as IRO
during 2009. The Audit Committee has considered whether the
service of PricewaterhouseCoopers as IRO is compatible with
maintaining the independence of the independent registered
public accounting firm.
The Audit Committee is satisfied that PricewaterhouseCoopers is
independent of King.
Based upon the results of the inquiries and actions discussed
above, in reliance upon information from management and
PricewaterhouseCoopers, and subject to the limitations of its
role, the Audit Committee recommended to the Board that the
audited financial statements be included in the Annual Report on
Form 10-K
for the year ended December 31, 2009 for filing with the
SEC.
The Audit Committee has appointed PricewaterhouseCoopers as the
companys independent registered public accounting firm for
2010. In the event the shareholders do not ratify the
appointment of PricewaterhouseCoopers as the companys
independent registered public accounting firm, the Audit
Committee will reconsider its appointment.
The Members of the Audit Committee
of the Board of Directors
R. Charles Moyer, Chair
Elizabeth M. Greetham
Philip A. Incarnati
D. Greg Rooker
14
REPORT OF
THE COMPENSATION AND HUMAN RESOURCES COMMITTEE OF THE BOARD OF
DIRECTORS
The following Report of the Compensation and Human Resources
Committee does not constitute soliciting material and should not
be deemed filed or incorporated by reference into any other
company filing under the Securities Act of 1933 or the Exchange
Act, except to the extent the company specifically incorporates
this Report by reference therein.
The Committee has reviewed and discussed with management the
Compensation Discussion and Analysis set forth below. Taking
this review and discussion into account, the undersigned
Committee members recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this proxy
statement.
The Compensation and Human Resources Committee of the Board
of Directors
Earnest W. Deavenport, Jr., Chair
Elizabeth M. Greetham
Gregory D. Jordan
Ted G. Wood
15
COMPENSATION
INFORMATION
COMPENSATION
DISCUSSION AND ANALYSIS
Our
Executive Compensation Philosophy
The fundamental goal of our compensation program is to build
long-term shareholder value. In order to build long-term
shareholder value, we must attract and retain exceptionally
talented and capable executives, and we must provide those
executives with incentives that motivate and reward them for
achieving Kings immediate and longer-term operational,
financial and scientific goals and strategic objectives. To this
end, our executive compensation program is guided by the
following key principles:
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Executive compensation should substantially depend upon measures
of company and individual performance. These measures should be
quantitative where appropriate, but the experienced and
independent judgment of the Compensation and Human Resources
Committee of our board of directors (for purposes of this
Compensation Discussion and Analysis, the Committee)
about Kings performance and the performance of an
executive is also integral to compensation decisions.
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The interests of executives should be closely aligned with those
of shareholders by providing a substantial percentage of
executives compensation opportunities in the form of King
equity and by connecting the potential value of this equity to
measures of company performance.
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Total compensation and individual compensation elements should
approximate the median compensation provided to similarly
situated executives within other publicly-traded pharmaceutical
companies of Kings size and complexity. Compensation
should be sufficient to retain the services of talented and
highly capable executives, and Kings executives should be
compensated equitably relative to one another, based upon their
respective duties and their relative levels of responsibility
and performance.
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Role of
the Compensation and Human Resources Committee in Determining
Executive Compensation
The decisions of, and guidance we receive from, the Committee
are vital to our compensation program. The Committee is composed
entirely of directors who are independent of King under the
independence standards established by the NYSE, the securities
exchange on which our common stock is traded.
The Committee has the authority and responsibility to establish
and periodically review our executive compensation principles,
described above. Importantly, the Committee also has sole
responsibility for determining the corporate goals and
objectives upon which the compensation of the CEO is based, for
evaluating (in consultation with all non-management directors)
the CEOs performance in light of these goals and
objectives and for determining the CEOs compensation and
benefits, including his equity-based compensation.
The Committee also reviews and approves the recommendations of
the CEO with regard to the compensation and benefits of other
executive officers. In accomplishing this responsibility, the
Committee meets regularly with the CEO, approves cash and equity
incentive objectives for the other executive officers, reviews
with the CEO the accomplishment of these objectives and approves
the base salary and other elements of compensation for the
executive officers. The Committee has full discretion to modify
the recommendations of the CEO in the course of its approval of
executive officer compensation.
The Committee also annually reviews, and makes recommendations
to the Board about, the compensation of non-employee directors,
a function it performs in conjunction with the Boards
Nominating and Corporate Governance Committee.
Our Incentive Plan, which was approved by shareholders in May
2005, provides for the grant of various equity awards, such as
stock options, restricted stock and performance share units, as
well as cash incentive awards, to Kings employees and
directors. The Committee is responsible for administering this
Plan and it has sole authority to make awards to the CEO or any
other executive officer. Our Board of Directors has sole
authority to make grants to directors under the Incentive Plan.
16
In conjunction with its responsibilities related to executive
compensation, the Committee also oversees Kings talent
management process, reviews plans for executive officer
succession and performs various other functions.
For additional information about the Committee, please see the
section entitled Board Committees, beginning on
page 11.
Role of
the Committees Compensation Consultant
The Committee consults regularly with an independent outside
compensation consulting firm retained by the Committee. As it
makes decisions about executive compensation, the Committee
frequently obtains data from its consultant and from third party
surveys regarding current compensation practices and trends
among United States companies in general, and pharmaceutical and
biosciences companies in particular, and reviews this
information with its consultant. The Committee also discusses
various other compensation matters with its consultant, both
during the course of the Committees regular meetings and
in private meetings. In addition, the Chairman of the Committee
is in regular contact with the consultant and with management
outside of Committee meetings regarding matters being considered
or expected to be considered by the Committee.
During 2009, the Committee was advised by James F.
Reda & Associates, LLC, an independent executive
compensation consulting firm. The Committee retained this firm,
and the firm did not provide any other services to King other
than assisting management in calculating the results of certain
performance-based awards approved by the Committee.
Our 2009
Compensation Program
The elements of executive compensation for 2009 were:
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base salary,
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the potential for incentive-based cash compensation based upon
our 2009 financial results,
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four types of equity compensation,
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certain benefits and perquisites, and
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the potential for post-termination compensation under certain
circumstances.
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In 2009, based on the grant date fair values for equity
incentives, base salary accounted for approximately 26% of the
total compensation of the named executive officers, equity-based
incentive compensation accounted for approximately 47%,
non-equity incentive compensation accounted for approximately
24% and all other compensation accounted for approximately 3%.
Information about each compensation element and its purposes
appears in the section below entitled Summary of 2009
Compensation Elements.
Our Named
Executive Officers
The individuals who served as Chief Executive Officer and Chief
Financial Officer during 2009, as well as the other individuals
included in the Summary Compensation Table on page 29, are
referred to as the named executive officers. At some
points in the discussion we also refer more generally to our
executive officers, the larger group of executives
whose compensation requires the approval of the Committee under
the terms of its charter.
17
Summary
of 2009 Compensation Elements
The table below provides detailed information regarding each
element of the 2009 compensation program.
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Compensation Element Overview
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Purposes of the Compensation Element
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Base Salary
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Base salary pays for competence in the executive role. An
executives salary level depends on the scope of his or her
responsibilities, individual performance, experience and the
relationship to amounts paid to similarly situated executives at
peer companies in our Comparator Group (as discussed under
Market Data and Our Comparator Group) and according
to third-party compensation survey results.
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To provide competitive fixed compensation based on sustained
performance in the executives role and competitive market
practice.
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Short-Term
Incentives
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Executive Management Incentive Award (EMIA) (Cash)
The EMIA provides cash awards for achievement of annual
corporate financial objectives. In 2009, these predetermined
objectives for our named executive officers related to cash from
operations and business unit operating income.
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To motivate and focus our executive team on the achievement of
our annual performance goals.
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Long-Term
Incentives
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Performance Share Units (PSUs)
(One-Year Performance Period + Two-Year Vesting Period)
One-Year PSUs encourage achievement of annual earnings per
share targets and encourage executive retention over the
additional two-year vesting period.
Participants may earn either 0% or between 50% and 200% of a
targeted number of PSUs based on Kings performance against
pre-established earnings per share targets for the performance
year, upon the Committees determination that the
applicable performance targets were achieved. Earned PSUs are
paid in common stock at the end of an additional two-year period
if the executive remains employed by King. The potential value
of a participants units increases and decreases according
to Kings stock price performance during the three-year
life of the PSUs.
(Three-Year Performance Period)
Three-Year PSUs reward achievement of Kings three-year
total shareholder return (stock price appreciation plus
dividends) for the period 2009 through 2011 versus the returns
of companies in the Dow Jones U.S. Pharmaceuticals Index.
Participants may earn either 0% or between 50% and 200% of a
targeted number of PSUs based on Kings performance
relative to the performance of companies in the Dow Jones U.S.
Pharmaceuticals Index. The potential value of a
participants units increases and decreases according to
Kings relative total shareholder return during the
three-year life of the PSUs.
Stock Options
Stock option awards vest in approximately thirds upon the
first three anniversaries of the grant date. The total life of
these awards is typically ten years if the recipient remains an
employee of King, which encourages executive retention during
this period. The potential value of stock options increases and
decreases according to Kings stock price performance
during the vesting term and ten-year total life, thus rewarding
sustained stock price appreciation.
Restricted Stock
Restricted stock awards vest in full on the third
anniversary of the grant date if the recipient remains an
employee of King, but they are forfeited if the recipient leaves
employment with King voluntarily. This structure encourages
executive retention during the vesting period. The potential
value of these awards increases and decreases according to
Kings stock price performance during the vesting term,
thus rewarding sustained stock price appreciation.
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We strive to use a balanced long-term equity incentive
portfolio, focusing on:
share price appreciation,
internal financial objectives,
performance relative to other companies
in our industry, and
retention of executives.
The primary objectives of our long-term equity incentive awards
are:
to align management interests with those
of shareholders,
to reward growth of the business,
increased profitability, and sustained shareholder value,
to increase managements potential
for stock ownership opportunities (all long-term awards are
earned in shares of common stock), and
to attract and retain excellent
management talent.
The overall value of target grants for each executive was
determined by multiplying the executives base salary by a
percentage that approximates the median percentage awarded to
similarly situated executives in the Comparator Group and
according to third-party compensation survey results.
The estimated relative grant values of the elements of the 2009
long-term awards are as follows:
PSUs One-Year
35%
PSUs Three-Year
15%
Stock Options
30%
Restricted Stock
20%
We believe that the relative weighting of these incentive awards
gives appropriate emphasis to each of the goals of the 2009
compensation program.
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18
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Compensation Element Overview
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Purposes of the Compensation Element
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Benefits
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In General
Executives participate in employee benefit plans available
to all employees of King, including health, life insurance and
disability plans. The cost of these benefits is partially borne
by the employee. More highly compensated employees, such as the
named executive officers, pay a greater percentage of benefit
costs than do other employees.
401(k) Plan
Executives may participate in Kings 401(k) retirement
savings plan, which is available to all employees. In 2009, the
company matched employees contributions to the plan,
typically up to 5% of their base salary, subject to regulatory
limits. Employees pay the fees associated with participating in
the 401(k) plan.
Non-Qualified Deferred Compensation Plan
Executives may participate in Kings Non-Qualified
Deferred Compensation Plan, which is generally available to
persons holding the title of Vice President or a more senior
title. King matches contributions to this plan to the extent
that deferrals reduce matching contributions otherwise available
under the 401(k) plan.
Life Insurance
King provides life insurance benefits to all employees. The
coverage amount for executives is $500,000 and premiums paid for
coverage above $50,000 are treated as imputed income to the
executive.
Disability Insurance
King provides short-term and long-term disability insurance
to all employees. In 2009, if a named executive officer had been
disabled, he would have received short-term disability payments
equal to 100% of his base salary for up to 26 weeks. If the
disability lasted longer than 26 weeks, he would have
received long-term disability payments of 60% of base salary,
not to exceed $20,000 per month.
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These benefits are designed to attract and retain employees and
provide security for their health and welfare and retirement
needs. We believe that these benefits are reasonable,
competitive and consistent with Kings overall executive
compensation program.
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19
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Compensation Element Overview
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Purposes of the Compensation Element
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Perquisites
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King does not utilize perquisites or personal benefits
extensively. The few perquisites that are provided complement
other compensation vehicles and enable the company to attract
and retain key executives. These perquisites include:
financial planning services, which cost
the company approximately $10,000 per executive in 2009, and
limited personal use of corporate
aircraft.
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We believe these benefits better allow us to attract and retain
superior employees for key positions, allow our executive team
to work more efficiently and limit distractions from Kings
business.
Financial planning services (a) allow
the executive team to stay focused on Kings business
issues by reducing time spent on personal financial matters, and
(b) allow our executive team to optimize the value of their
compensation and our benefit programs.
The Committee is responsible for
determining the general parameters for personal use of corporate
aircraft by executives, and the Committee regularly reviews such
usage, including usage by the Chief Executive Officer. Further,
each use of a corporate aircraft by an executive for personal
purposes (1) requires the specific approval of the Chief
Executive Officer, (2) is only allowed if it would not interfere
with Kings operations, and (3) results in imputed income
to the executive according to Internal Revenue Code and
Department of Transportation requirements. The incremental cost
of aircraft use by the named executive officers to the company
is included in column (i) of the Summary Compensation Table and
the additional table detailing All Other
Compensation beginning on page 29.
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20
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Compensation Element Overview
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Purpose of the Compensation Element
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Post-
Termination
Pay
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Severance Plan
Kings Severance Pay Plan: Tier I (the Severance
Plan) is designed to pay severance benefits to an
executive for a qualifying separation. It is also designed to
pay an enhanced benefit for a qualifying separation in
connection with a change in control. It applies to all named
executive officers.
For the CEO, the Severance Plan provides for a payment, upon the
occurrence of certain termination events, of two times the sum
of (1) base salary and (2) an amount equal to his target cash
incentive award, and three times this sum upon the occurrence of
certain termination events following a change in control. In
addition, the payment would include compensation for any earned
but unused vacation days.
For the other named executive officers, the Severance Plan
provides for a payment, upon the occurrence of certain
termination events, of one and one-half times the sum of (1)
base salary and (2) an amount equal to the officers target
cash incentive award, and two times this sum upon the occurrence
of certain termination events following a change in control. In
addition, the payment would include compensation for any earned
but unused vacation days.
For additional information regarding the Severance Plan see the
section entitled Post-Termination Payments beginning
on page 35.
Offer Letters
Typically, a named executive officer will agree to the terms
of an offer letter in connection with the acceptance of a
position at King. Offer letters have sometimes contained
provisions related to severance matters, as does the offer
letter related to Mr. Markisons appointment as CEO. For
information regarding the terms of this offer letter, please see
the section entitled Post-Termination Payments
beginning on page 35.
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The Severance Plan is intended to allow executives to
concentrate on making decisions in the best interests of King
(or any successor organization in the event that a change in
control is to occur). These severance benefits also reflect the
fact that it may be difficult for such executives to find
comparable employment within a short period of time and are
therefore intended to alleviate an executives concerns
about the loss of his or her position without cause.
We regularly use offer letters in connection with the hiring of
new employees. These letters have contained provisions related
to post-termination pay and benefits when necessary to provide
short-term employment security to newly-hired executives.
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Market
Data and Our Comparator Group
In determining 2009 compensation for the named executive
officers, the Committee relied on market data provided by its
consultant, James F. Reda & Associates LLC. This
information was principally related to a group of 19
pharmaceutical and healthcare companies similar in size to King
(we refer to this group of companies as the Comparator
Group), but it also included third-party compensation
survey results. This group had median 2008 revenues of
approximately $2.1 billion. Information about these
companies was obtained from publicly-available information
appearing in their proxy statements, supplemented with
pharmaceutical industry information from published and
third-party survey sources. The members of the Comparator Group
for 2009 were:
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Allergan, Inc.
Alpharma Inc.
Barr Pharmaceuticals, Inc.
Biogen Idec Inc.
Biovail Corporation
Celgene Corporation
Cephalon Inc.
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Endo Pharmaceuticals Holdings, Inc.
Forest Laboratories, Inc.
Genzyme Corporation
Gilead Sciences, Inc.
Hospira, Inc.
The Medicines Company
Mylan, Inc.
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Par Pharmaceutical Companies, Inc.
Sepracor Inc.
Valeant Pharmaceuticals International
Warner Chilcott Limited
Watson Pharmaceuticals, Inc.
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The Committee evaluates and approves the Comparator Group
annually, revising it as necessary to ensure that it continues
to be appropriate for benchmarking our executive compensation
program.
In evaluating appropriate compensation program designs, the
Committee also considered the approaches employed by larger
pharmaceutical companies, but information related to these
companies was not used in making decisions about the amount of
compensation to be provided to any executive officer.
21
Base
Salary
As discussed above, base salaries for the named executive
officers are intended to approximate median salaries for
similarly situated executives among Comparator Group companies.
The Committee considers a number of additional factors, however,
in determining base salary, such as the executives
individual performance, his or her experience and tenure,
internal compensation consistency, the need to attract new,
talented executives, and the companys overall annual
budget. Base salaries are generally reviewed on an annual basis,
early in the calendar year. Adjustments to base salary, if any,
are typically effective in late March or early April of the same
year.
Until March 22, 2010, when the Committee approved base
salary increases for Mr. Markison and each of our named
executive officers, Mr. Markisons base salary had
been unchanged since March 25, 2008. His base salary is
lower than the median base salary of the chief executive
officers among our Comparator Group. The 2009 base salaries for
the other named executive officers approximated the median base
salary of similarly situated officers among our Comparator
Group. Effective March 22, 2010, following reviews of the
2009 activities and performance of the named executive officers,
the Committee approved the following base salaries:
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Brian A. Markison
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$
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999,900
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Joseph Squicciarino
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$
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624,000
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Eric J. Bruce
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$
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448,800
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James W. Elrod
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$
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486,700
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Eric G. Carter
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$
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451,400
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Individual performance was one of several material factors
considered by the Committee in connection with adjustments to
executive base salaries related to 2009. In assessing individual
performance, the Committee focused upon the degree of an
executives accomplishment of corporate objectives and
strategic goals, including, as applicable to various executives,
goals related to: manufacturing, product quality, research and
development, product sales, talent management and development,
risk management, cost-saving initiatives, achievement of
operational efficiencies, the advancement of business
development opportunities and similar objectives.
2009
Executive Management Incentive Award (EMIA)
Potential
Payouts
The 2009 Executive Management Incentive Award (EMIA)
program allowed executives the opportunity to earn cash awards
upon the accomplishment of predetermined 2009 financial
objectives. Potential target EMIA awards approximated the 50th
percentile for short-term cash awards provided to similarly
situated executives among Comparator Group companies, based on
market data provided by the Committees consultant.
The table below shows the overall potential payout amounts
approved by the Committee for each of the named executive
officers, expressed as percentages of base salary.
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Joseph
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Performance Level
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Brian A. Markison
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Squicciarino
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Eric J. Bruce
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James W. Elrod
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Eric G. Carter
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Maximum/Stretch
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200
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%
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140
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%
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120
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%
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120
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%
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120
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%
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Target
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100
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%
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70
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%
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60
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%
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60
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%
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60
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%
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Threshold
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50
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%
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35
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%
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30
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%
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30
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%
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30
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%
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Below threshold
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0
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%
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0
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%
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0
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%
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0
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%
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0
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%
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Objectives
Beginning in mid-2008, the Committee and members of management
began discussing potential performance goals for the 2009 EMIA
program. In late 2008, King acquired Alpharma Inc.
(Alpharma), a global specialty pharmaceutical
company that developed and produced products for humans and
animals. In connection with this acquisition, King incurred
approximately $625 million in new debt obligations.
Mr. Markison advised the Committee that rapid repayment of
these new debt obligations was a key objective for 2009 because
it would reduce interest expense and better position King to
pursue future business development opportunities. He therefore
recommended to the Committee that it adopt objectives that would
encourage and reward the generation and saving of cash that
could be used to prepay Kings debt obligations. After
discussing various corporate objectives with Mr. Markison,
and after consultation with Kings Chief
22
Financial Officer, in March 2009 the Committee approved EMIA
goals for the named executive officers related to maximizing
Kings cash from operations and operating income within the
animal health business. In June 2009 management recommended, and
the Committee approved, amendments to the Animal Health
objective that increased the threshold, target and stretch
goals. The objectives approved by the Committee are detailed in
the table below.
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Objective
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Threshold
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Target
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Stretch
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Corporate Cash from Operations
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$401 million
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$421 million
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$467 million
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Animal Health Operating Income (modified)*
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$57 million
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$61 million
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$71 million
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*
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For purposes of determining
achievement of the EMIA targets, this measure adjusts for
certain categories of recurring and non-recurring items that the
Committee believes do not reflect the performance of Kings
core continuing operations and is not directly comparable to
similar measures appearing in Kings financial statements.
The Committee identified the categories of items to be excluded
at the same time it set the target and reviewed each of them
quarterly in 2009 and again in early 2010 as part of the process
of determining the degree to which the objective was achieved.
|
Weighting
of Objectives
The relative weighting of these objectives for each executive
depended upon the executives ability to effect the
accomplishment of the objective. Actual payouts thus depended
not only upon the degree to which objectives were accomplished
but also upon the weight accorded to each objective for that
executive. The relative weights of the objectives for each named
executive officer are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Objective Weighting
|
|
|
|
|
Joseph
|
|
|
|
|
|
|
|
|
|
|
Squicciarino
|
|
Eric J. Bruce
|
|
|
|
|
|
|
Brian A. Markison
|
|
Chief Financial
|
|
President,
|
|
James W. Elrod
|
|
Eric G. Carter
|
Objective
|
|
President and CEO
|
|
Officer
|
|
Alpharma Animal Health
|
|
Chief Legal Officer
|
|
Chief Science Officer
|
|
Corporate Cash from Operations
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
80
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Animal Health Operating Income (modified)
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
20
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
The Committee also determined that, if results were between the
threshold and target objectives, or between the target and
maximum objectives, straight-line interpolation would be applied
to determine the appropriate payout percentage. The program also
provided that no payout would occur under any objective if the
company failed to achieve at least threshold Corporate Cash from
Operations.
Program
Results
All payouts to executive officers under the 2009 EMIA program
were contingent upon the Committees review and
certification of the degree to which King achieved each
objective. In early 2010, the Committee reviewed Kings
2009 financial results for purposes of the EMIA program. It
determined that the result under the Corporate Cash from
Operations objective was approximately $431 million, or
121.1% of the target objective. The result under the Animal
Health Operating Income objective was approximately
$58 million, or 62.5% of the target objective.
The Committee also reviewed the results of our debt repayment
efforts, noting that, as of December 31, 2009, we had
already repaid approximately $533 million, or 85%, of the
debt incurred in connection with the Alpharma acquisition, an
amount approximately $309 million higher than required by
our repayment schedule as of that date.
The table below shows the amounts paid to the named executive
officers based upon achievement of objectives under the 2009
EMIA program.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
Officer
|
|
|
2009 EMIA Payout
|
|
|
of Target
|
|
Brian A. Markison
|
|
|
$
|
1,198,761
|
|
|
|
|
121
|
%
|
Joseph Squicciarino
|
|
|
$
|
508,565
|
|
|
|
|
121
|
%
|
Eric J. Bruce
|
|
|
$
|
283,158
|
|
|
|
|
109
|
%
|
James W. Elrod
|
|
|
$
|
340,012
|
|
|
|
|
121
|
%
|
Eric G. Carter
|
|
|
$
|
315,310
|
|
|
|
|
121
|
%
|
23
2009 Long
Term Incentive Awards (LTIA)
Design
The Committee believes that long-term equity incentives are an
important part of a complete compensation package because they
focus executives on achieving Kings long-term goals, align
the interests of executives with those of shareholders,
encourage sustained stock performance and help to retain
executives.
In March 2009, the Committee granted four different types of
incentive awards to executives, each designed to emphasize
certain elements of the companys long-term objectives
and/or to
retain key executives. We refer to these four grants
collectively as the 2009 Long Term Incentive Awards
(LTIA). The four types of grants were as follows:
|
|
|
|
|
One-Year PSUs. The number of One-Year PSUs
received by an executive could have been 0% or between 50% and
200% of a target number, depending upon Kings 2009
earnings per share excluding certain special items and recurring
adjustments. The PSUs are then subject to a two-year holding
period, after which each PSU is to be paid with one share of
common stock.
|
|
|
|
Three-Year PSUs. The number of Three-Year PSUs
paid in common stock at the end of three years could be 0% or
between 50% and 200% of a target number, depending upon
Kings total shareholder return over the years 2009 through
2011 as compared to the total shareholder return of the stocks
making up the Dow Jones U.S. Pharmaceutical Index.
|
|
|
|
Stock options. Stock options become
exercisable over three years (33%, 33% and 34% on each
anniversary of the grant date) and have a term of ten years, or
a shorter period if the executive leaves the company.
|
|
|
|
Restricted stock. Restricted stock vests on
the third anniversary of the date of grant if the executive is
still employed by King as of that date.
|
The Committee assessed the appropriate overall value of these
equity grants to executives by reviewing information about the
value of equity grants made to similarly situated executives in
Comparator Group companies and third-party compensation survey
results provided by its consultant. The overall value of LTIA
grants for each executive was determined by multiplying the
executives base salary by a percentage that approximates
the median percentage used for similarly situated executives in
the Comparator Group. In establishing the specific percentage
for each executive, the Committee also considered the potential
value of equity compensation relative to other elements of the
executives total compensation. These percentages were 350%
of base salary for Mr. Markison, 200% for
Mr. Squicciarino and 160% for Mr. Bruce,
Mr. Elrod and Dr. Carter. Mr. Markisons
percentage was lower than the median percentage for similarly
situated chief executive officers within the Comparator Group.
The Committee likewise assessed the appropriate distribution of
value among the four award types, as well as the corporate
objectives each type of grant was intended to encourage
executives to address. (Please see the section above called
Summary of 2009 Compensation Elements for more
information about the purposes of each award type.) It was the
judgment of the Committee that appropriate promotion of
Kings objectives throughout the duration of the awards
would be best accomplished by the following distribution of the
total estimated equity grant value among the four award types:
35% in the form of One-Year PSUs (assuming target performance),
15% in the form of Three-Year PSUs (assuming target
performance), 30% in the form of stock options and the remaining
20% in the form of restricted stock. This relative weighting of
these awards results in a greater percentage of Kings
awards being performance-based than is typical among our
Comparator Group.
One-Year
Performance Share Units (PSUs)
The objective of the One-Year PSUs is to promote Kings
growth, as measured by its earnings per share results. The
Committee reviewed and approved these earnings per share
objectives in March 2009 following discussions with management,
a review of Kings historical results, considerations of
the various circumstances facing the company during 2009,
including the need to successfully integrate Alpharma into
Kings operations, and also taking into account the
24
earnings per share expectations of our annual plan. The
objectives approved by the Committee are detailed in the table
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Objective
|
|
Threshold
|
|
Target
|
|
Stretch
|
|
Earnings per share (modified)*
|
|
$
|
0.48
|
|
|
$
|
0.57
|
|
|
$
|
0.63
|
|
|
|
|
*
|
|
For purposes of determining
achievement of the One-Year PSU targets, this measure adjusts
for certain categories of recurring and non-recurring items that
the Committee believes do not reflect the performance of
Kings core continuing operations and is not directly
comparable to similar measures appearing in Kings
financial statements. The Committee identified the categories of
items to be excluded at the same time it set each EMIA target
and reviewed each of them quarterly in 2009 and again in early
2010 as part of the process of determining the degree to which
the objective was achieved.
|
The exact number of One-Year PSUs that could be earned by each
executive depended upon the degree to which the earnings per
share objective was accomplished. The Committee established, for
each executive officer, a target number of One-Year PSUs, taking
into account the value of the PSUs relative to other elements of
the 2009 LTIA program and based on the executives base
salary. The target numbers of One-Year PSUs for the named
executive officers appear in the table below.
|
|
|
|
|
Officer
|
|
Target One-Year PSUs
|
|
Brian A. Markison
|
|
|
139,080
|
|
Joseph Squicciarino
|
|
|
48,170
|
|
Eric J. Bruce
|
|
|
27,710
|
|
James W. Elrod
|
|
|
30,060
|
|
Eric G. Carter
|
|
|
27,870
|
|
The Committee also determined that executives would have the
opportunity to earn the following payouts, depending upon the
degree of accomplishment of the established objectives, with
performance falling between defined objective levels determined
by straight-line interpolation between the defined levels.
|
|
|
|
|
|
|
Payout
|
Performance Level
|
|
(as a percentage of Target)
|
|
Stretch or greater
|
|
|
200
|
%
|
Target
|
|
|
100
|
%
|
Threshold
|
|
|
50
|
%
|
Below Threshold
|
|
|
0
|
%
|
The information above notwithstanding, the Committee also
determined that no payout of One-Year PSUs would occur if the
company failed to achieve at least 85% of target earnings per
share. It also reserved the right to reduce or eliminate any
payout of One-Year PSUs if the Committee determined that it was
in Kings best interest to do so.
All 2009 One-Year PSU awards were contingent upon the
Committees review and certification of the degree to which
King achieved the predetermined financial objective.
In early 2010, the Committee reviewed Kings earnings per
share results for purposes of the 2009 One-Year PSUs. It
determined that King earned $0.66 per share, above the stretch
objective. Based on this outcome, the named executive officers
received the following numbers of One-Year PSUs, which are now
subject to a two-year holding period that ends on
December 31, 2011, after which these awards will be settled
in shares of common stock.
|
|
|
|
|
Officer
|
|
One-Year PSUs Awarded
|
|
Brian A. Markison
|
|
|
278,160
|
|
Joseph Squicciarino
|
|
|
96,340
|
|
Eric J. Bruce
|
|
|
55,420
|
|
James W. Elrod
|
|
|
60,120
|
|
Eric G. Carter
|
|
|
55,740
|
|
Three-Year
Performance Share Units
Each executive officer has the opportunity to earn Three-Year
PSUs, the exact number of which depends upon Kings total
shareholder return for a three-year period relative to the
companies making up the Dow Jones U.S. Pharmaceutical Index.
25
Three-Year PSUs for
2009-2011. In
2009, the Committee determined for each executive officer a
target number of Three-Year PSUs, taking into account the value
of the PSUs relative to other elements of the 2009 LTIA program
and based on the executives base salary. The target
numbers of Three-Year PSUs for the named executive officers
appear in the table below.
|
|
|
|
|
Officer
|
|
Target Three-Year PSUs
|
|
Brian A. Markison
|
|
|
59,600
|
|
Joseph Squicciarino
|
|
|
20,640
|
|
Eric J. Bruce
|
|
|
11,880
|
|
James W. Elrod
|
|
|
12,880
|
|
Eric G. Carter
|
|
|
11,940
|
|
Under the terms of these awards, achievement of the
predetermined objectives below would result in payouts of
Three-Year PSUs as follows, with performance falling between
defined objective levels determined by straight-line
interpolation between the defined levels.
|
|
|
|
|
Kings Total Shareholder Return Percentile Rank
|
|
Payout
|
among Dow Jones U.S. Pharmaceuticals Index Companies
|
|
(as a percentage of Target)
|
|
>70th
percentile
|
|
|
200
|
%
|
70th
percentile
|
|
|
200
|
%
|
50th
percentile
|
|
|
100
|
%
|
30th
percentile
|
|
|
50
|
%
|
<30th
percentile
|
|
|
0
|
%
|
The results for the 2009 Three-Year PSUs will not be known until
the completion of the three-year performance period on
December 31, 2011, but Kings total shareholder return
performance for 2009 placed it in the 48th percentile relative
to the companies in the Dow Jones U.S. Pharmaceutical
Index. If this percentile represented Kings performance
during the entire performance period for the 2009 Three-Year
PSUs, the payout under these awards would be 95% of the target
number of Three-Year PSUs.
Three-Year PSUs for
2008-2010. The
results for the 2008 Three-Year PSUs will not be known until the
completion of the three-year performance period on
December 31, 2010, but Kings cumulative total
shareholder return performance for 2008 and 2009 placed it in
the 78th
percentile relative to the companies in the Dow Jones
U.S. Pharmaceutical Index. If this percentile represented
Kings performance during the entire performance period for
the 2008 Three-Year PSUs, the payout under these awards would be
200% of the target number of Three-Year PSUs.
Three-Year PSUs for
2007-2009. Kings
cumulative total shareholder return performance for 2007 through
2009 for the Three-Year PSUs granted in 2007 placed it in the
22nd percentile relative to the companies in the Dow Jones
U.S. Pharmaceutical Index. There was therefore no payout
under the 2007 Three-Year PSU awards.
Stock
Options and Restricted Stock
The stock options and shares of restricted stock granted as part
of the 2009 LTIA program were designed to reward sustained stock
price appreciation and to encourage executive retention during a
three-year vesting term and, in the case of stock options, a
ten-year option life. Grants of stock options and restricted
stock were not contingent upon any performance conditions. Stock
options become exercisable approximately in thirds on the first
three anniversaries of the date of grant, subject to the
executives continued employment with King. Restricted
stock vests in full on the third anniversary of the date of
grant if the executive remains employed by King as of that date.
For more information about these stock option and restricted
stock awards, please see 2009 Grants of Plan Based
Awards on page 31.
Benefits
We provide executive officers with benefits that we believe are
reasonable and consistent with our overall compensation program
to better enable us to attract and retain superior employees for
key positions. The Committee periodically reviews the benefits
provided to executive officers.
During 2009, King matched employees contributions to the
King Pharmaceuticals, Inc. 401(k) Retirement Savings Plan,
typically up to 5% of an employees base salary, subject to
regulatory limits. Contributions by the named executive
26
officers were matched in this way, subject to the limitations of
the plan and applicable law. The named executive officers
participate in other qualified benefit plans, such as medical
insurance plans, in the same manner as all other employees.
Highly compensated employees, such as the named executive
officers, pay a larger portion of the premiums for these benefit
plans than lower-compensated employees pay.
King provides life insurance coverage to all employees. For the
named executive officers, this insurance would, in the event of
death, pay $500,000 to designated beneficiaries. Premiums paid
for coverage above $50,000 are treated as imputed income to the
executive. King also provides short-term and long-term
disability insurance to all employees. For the named executive
officers, this insurance would, in the event of disability,
provide short-term disability payments equal to 100% of the
officers base salary for up to 26 weeks. If the
disability lasted longer than 26 weeks, the officer would
receive long-term disability payments of 60% of base salary, not
to exceed $20,000 per month.
The King Pharmaceuticals, Inc. Deferred Compensation Plan is a
tax-deferred compensation program for a limited number of
executives, including the named executive officers. It provides
a tax-favorable vehicle for deferring cash compensation,
including base salary and awards pursuant to the EMIA program.
Under the plan, an executive may defer up to 75% of his or her
base salary and up to 90% of annual incentive pay. Deferred
balances are credited with gains or losses which mirror the
performance of benchmark investment funds selected by the
participant from among twelve available funds and eleven target
date funds. Deferred amounts are paid, at the participants
option, either in a lump sum or in annual installments over a
period of up to ten years for retirement or termination
distributions, or up to five years for scheduled in-service
withdrawals. King matches contributions to this plan to the
extent that deferrals reduce matching contributions otherwise
available under the 401(k) plan. In 2009, none of the named
executive officers other than Dr. Carter deferred any
compensation under our Deferred Compensation Plan.
Perquisites
We provide executive officers with limited perquisites that we
believe are reasonable and consistent with our overall
compensation program to better enable us to attract and retain
superior employees for key positions. The Committee periodically
reviews the perquisites provided to executive officers.
The Committee is responsible for determining the general
parameters for personal use of corporate aircraft by executives,
and the Committee regularly reviews such usage, including usage
by the Chief Executive Officer. The Committee has adopted a
policy permitting limited personal use of corporate aircraft by
the named executive officers and others. Personal use must not
conflict with the needs of the company and each use must be
specifically approved by the Chief Executive Officer. Personal
flights are treated as income to the employee pursuant to the
Standard Industry Fare Level standards established by the
U.S. Department of Transportation. The incremental cost to
King of any personal aircraft use by the named executive
officers is included in column (i) of the Summary
Compensation table and the additional tables detailing All
Other Compensation beginning on page 29.
The named executive officers are also provided financial
planning assistance, the costs of which (approximately $10,000
per executive in 2009) are
grossed-up
for income tax purposes.
Severance
and Change in Control Benefits
We believe that reasonable severance and change in control
benefits are necessary in order to recruit and retain effective
senior executives and are generally required by the competitive
recruiting environment within our industry. These severance
benefits reflect the fact that it may be difficult for such
executives to find comparable employment within a short period
of time and are designed to alleviate an executives
concerns about the loss of his or her position without cause. We
also believe that a change in control arrangement will help
facilitate change in control transactions that could be in the
best interests of our shareholders. For a detailed discussion of
potential severance and change of control benefits, see
Post-Termination Payments, beginning on page 35.
Share
Ownership Guidelines
The Committee has, on approximately an annual basis, considered
the adoption of share ownership guidelines, discussing the
matter with management and with its compensation consultant. The
Committee has also reviewed information about the use of these
guidelines in companies of Kings size and among
pharmaceutical companies generally.
27
Based on these reviews, the Committee has determined not to
adopt ownership guidelines but to review the issue periodically.
Timing of
Committee Meetings and Grants; Option Pricing; Other Equity
Grants
The Committee typically holds five regular meetings each year,
and the timing of these meetings is generally established during
the prior year. The Committee holds special meetings from time
to time as its workload requires. Typically, annual grants of
equity awards have been made at a meeting of the Committee in
March of each year. The 2009 LTIA grants were made by the
Committee in March of that year. Individual grants (for example,
associated with the hiring of a new executive officer) may occur
at other times of the year. We do not coordinate the timing of
equity award grants with the release of material non-public
information. The exercise price of each stock option awarded to
our executive officers is the closing price of our common stock
on the date of grant.
We have adopted a policy that addresses the procedures for
review and adoption of equity incentive plans, offers of equity
grants to employees, prospective employees, directors and
prospective directors. The policy defines the processes through
which these grants are reviewed and approved, and it also
addresses SEC reporting obligations, notification of grant
recipients, recordkeeping requirements, tax requirements and
other matters. Key elements of the policy include the following:
|
|
|
|
|
No equity grant may be offered to any employee, prospective
employee, director or prospective director without prior proper
authorization unless the offer advises that any equity grant
ultimately awarded would depend upon proper review and approval.
All offers of equity grants must be made in writing.
|
|
|
|
Only the Committee is authorized to make equity grants to our
executive officers. All such grants, and all other grants made
by the Committee, are recorded in the Committees minutes.
|
|
|
|
Only the Board of Directors is authorized to make equity grants
to non-employee members of our Board of Directors. All such
grants are recorded in the Boards minutes.
|
|
|
|
Our Incentive Plan provides that stock options granted pursuant
to the plan must have an exercise price no less than the closing
price of our common stock on the date the option is granted.
|
|
|
|
The Committee has delegated to the CEO limited authority to make
grants, pursuant to our Incentive Plan, of nonqualified stock
options and restricted stock to employees who are not executive
officers. Unless otherwise authorized by the Committee, the CEO
is authorized to grant a total of no more than 250,000 stock
options and shares of restricted stock per calendar year, and
unused shares are not carried from one year to the next. No
single grant of restricted stock may exceed 25,000 shares
and no single grant of stock options may exceed 50,000 options.
Further, no employee may receive, through this process, more
than one grant of stock options and one grant of restricted
stock per calendar year. The CEO is authorized to determine the
vesting schedule of the grants made pursuant to this process,
but all other terms must conform to a form of grant agreement
previously approved by the Committee. The exercise price of all
stock options must not be less than the closing price of our
common stock on the grant date. The CEO is required to report to
the Committee not less than twice per year regarding his use of
this delegated authority.
|
If the CEO wishes to use this authority to make a grant of stock
options or restricted stock, the policy requires that he first
approve all material terms of the proposed equity grant and
submit these terms to an Equity Grant Completion Committee (or
EGCC) for review. The EGCC is composed of two
members of management, one from the Human Resources Department
and an attorney from the Legal Department, and it operates
pursuant to a written charter. The EGCC is required to verify
that the terms of the proposed equity grant, if the grant were
completed, conform with legal requirements, with the authority
delegated to the CEO by the Committee, with company policies,
with the applicable equity incentive plan and with other
applicable requirements. If the EGCC determines unanimously that
all of these requirements are met, then the grant is made, with
a grant date of the 15th day of the month following the month
during which the EGCC approved the terms of the grant. The
EGCCs approval of a grant may be withheld only if
completion of the equity grant would not conform with the
requirements described above, and the EGCC has no independent
authority to make equity grants.
28
Tax
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as
amended, precludes the deductibility of an executive
officers compensation that exceeds $1.0 million per
year unless the compensation is paid under a performance-based
plan that has been approved by shareholders. The Committee
generally prefers that the compensation of our executive
officers complies with the requirements of Section 162(m)
through, for example, the use of our Incentive Plan. However, to
maintain flexibility in compensating executive officers in a
manner that attracts, rewards and retains high quality
individuals, the Committee may elect to provide compensation
outside of those requirements when it deems appropriate. The
Committee believes that shareholder interests are best served by
not restricting the Committees discretion in this regard,
even though such compensation may result in non-deductible
compensation expense to the company.
EXECUTIVE
AND DIRECTOR COMPENSATION TABLES
The following table summarizes the compensation paid to the
companys named executive officers for 2009, 2008 and 2007.
The named executive officers were not entitled to receive
payments which would be characterized as Bonus
payments for the years ended December 31, 2007, 2008 and
2009.
There are no above-market or preferential earnings on deferred
compensation. Consequently, the table does not include earnings
on deferred amounts. None of the named executive officers is
eligible for pension benefits as King does not have any defined
benefit programs in which the named executive officers are
eligible to participate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(g)
|
|
|
|
|
|
|
|
|
|
|
(e)
|
|
(f)
|
|
Non-Equity
|
|
(i)
|
|
|
|
|
|
|
(c)
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
(j)
|
(a)
|
|
(b)
|
|
Salary
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name And Principal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
Brian A. Markison
|
|
|
2009
|
|
|
|
990,000
|
|
|
|
1,954,202
|
(4)
|
|
|
746,837
|
|
|
|
1,198,761
|
|
|
|
89,964
|
|
|
|
4,979,764
|
|
President and Chief
|
|
|
2008
|
|
|
|
980,820
|
|
|
|
1,937,281
|
|
|
|
740,758
|
|
|
|
980,820
|
|
|
|
125,300
|
|
|
|
4,764,979
|
|
Executive Officer
|
|
|
2007
|
|
|
|
922,945
|
|
|
|
5,314,241
|
|
|
|
862,260
|
|
|
|
1,780,926
|
|
|
|
162,780
|
|
|
|
9,043,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Squicciarino
|
|
|
2009
|
|
|
|
600,000
|
|
|
|
676,786
|
(5)
|
|
|
258,627
|
|
|
|
508,565
|
|
|
|
57,865
|
|
|
|
2,101,843
|
|
Chief Financial Officer
|
|
|
2008
|
|
|
|
552,000
|
|
|
|
720,098
|
|
|
|
275,352
|
|
|
|
386,400
|
|
|
|
75,940
|
|
|
|
2,009,790
|
|
|
|
|
2007
|
|
|
|
511,434
|
|
|
|
4,021,684
|
|
|
|
255,280
|
|
|
|
716,008
|
|
|
|
60,401
|
|
|
|
5,564,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric J. Bruce
|
|
|
2009
|
|
|
|
431,500
|
|
|
|
389,366
|
(6)
|
|
|
148,790
|
|
|
|
283,158
|
|
|
|
178,358
|
|
|
|
1,431,172
|
|
President, Alpharma
|
|
|
2008
|
|
|
|
411,000
|
|
|
|
375,412
|
|
|
|
143,509
|
|
|
|
246,600
|
|
|
|
27,054
|
|
|
|
1,203,575
|
|
Animal Health
|
|
|
2007
|
|
|
|
395,200
|
|
|
|
1,371,092
|
|
|
|
167,378
|
|
|
|
474,240
|
|
|
|
33,103
|
|
|
|
2,441,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James W. Elrod
|
|
|
2009
|
|
|
|
468,000
|
|
|
|
422,315
|
(7)
|
|
|
161,378
|
|
|
|
340,012
|
|
|
|
26,438
|
|
|
|
1,418,143
|
|
Chief Legal Officer
|
|
|
2008
|
|
|
|
431,500
|
|
|
|
394,068
|
|
|
|
150,648
|
|
|
|
258,900
|
|
|
|
27,960
|
|
|
|
1,263,076
|
|
and Secretary
|
|
|
2007
|
|
|
|
375,200
|
|
|
|
1,442,710
|
|
|
|
107,841
|
|
|
|
375,200
|
|
|
|
24,211
|
|
|
|
2,325,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric G. Carter
|
|
|
2009
|
|
|
|
434,000
|
|
|
|
391,612
|
(8)
|
|
|
149,653
|
|
|
|
315,310
|
|
|
|
27,054
|
|
|
|
1,317,629
|
|
Chief Science Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The amounts shown represent the
grant date fair values of awards for the fiscal years ended
December 31, 2009, 2008 and 2007 in accordance with FASB
ASC Topic 718. Assumptions used in the calculation of these
amounts are described in Note 21, Stock-Based
Compensation, to our financial statements for the year
ended December 31, 2009, included in our Annual Report on
Form 10-K
that was filed with the SEC on February 26, 2010. All
awards were made under the companys Incentive Plan and are
subject to individual award agreements, the forms of which were
previously filed with the SEC. During 2009, 2008 and 2007, there
were no forfeitures of awards related to service-based vesting
conditions for the named executive officers.
|
|
(2)
|
|
Amounts represent cash incentive
awards pursuant to the 2009, 2008 and 2007 EMIA programs.
|
29
|
|
|
(3)
|
|
The following two tables detail
All Other Compensation received by each named
executive officer for 2009.
|
|
(4)
|
|
Includes $969,388 reflecting the
grant date fair value of One-Year PSUs granted in 2009. If the
maximum performance goal for these PSUs were met, their grant
date fair value would be $1,938,776.
|
|
(5)
|
|
Includes $335,745 reflecting the
grant date fair value of One-Year PSUs granted in 2009. If the
maximum performance goal for these PSUs were met, their grant
date fair value would be $671,490.
|
|
(6)
|
|
Includes $193,139 reflecting the
grant date fair value of One-Year PSUs granted in 2009. If the
maximum performance goal for these PSUs were met, their grant
date fair value would be $386,278.
|
|
(7)
|
|
Includes $209,518 reflecting the
grant date fair value of One-Year PSUs granted in 2009. If the
maximum performance goal for these PSUs were met, their grant
date fair value would be $419,036.
|
|
(8)
|
|
Includes $194,254 reflecting the
grant date fair value of One-Year PSUs granted in 2009. If the
maximum performance goal for these PSUs were met, their grant
date fair value would be $388,508.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Personal
|
|
|
Relocation
|
|
|
401(k) Matching
|
|
|
Tax
|
|
|
Total Other
|
|
Name
|
|
Benefits
|
|
|
Payments
|
|
|
Contributions
|
|
|
Reimbursement
|
|
|
Compensation
|
|
|
|
(In Dollars)
|
|
|
Brian A. Markison
|
|
|
71,735
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
5,979
|
|
|
|
89,964
|
|
Joseph Squicciarino
|
|
|
39,636
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
5,979
|
|
|
|
57,865
|
|
Eric J. Bruce
|
|
|
109,759
|
|
|
|
34,535
|
|
|
|
12,250
|
|
|
|
21,814
|
|
|
|
178,358
|
|
James W. Elrod
|
|
|
10,000
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
4,188
|
|
|
|
26,438
|
|
Eric G. Carter
|
|
|
10,000
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
4,804
|
|
|
|
27,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian A.
|
|
|
Joseph
|
|
|
|
|
|
|
|
|
|
|
Type of Compensation
|
|
Markison
|
|
|
Squicciarino
|
|
|
Eric J. Bruce
|
|
|
James W. Elrod
|
|
|
Eric G. Carter
|
|
|
|
(In Dollars)
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial planning
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
Personal use of corporate aircraft*
|
|
|
61,735
|
|
|
|
29,636
|
|
|
|
99,759
|
|
|
|
0
|
|
|
|
0
|
|
Total Perquisites
|
|
|
71,735
|
|
|
|
39,636
|
|
|
|
109,759
|
|
|
|
10,000
|
|
|
|
10,000
|
|
Relocation Payments
|
|
|
0
|
|
|
|
0
|
|
|
|
34,535
|
|
|
|
0
|
|
|
|
0
|
|
401(k) Matching Contributions
|
|
|
12,250
|
|
|
|
12,250
|
|
|
|
12,250
|
|
|
|
12,250
|
|
|
|
12,250
|
|
Tax Reimbursements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial planning
|
|
|
5,979
|
|
|
|
5,979
|
|
|
|
4,178
|
|
|
|
4,188
|
|
|
|
4,804
|
|
Relocation Payments
|
|
|
0
|
|
|
|
0
|
|
|
|
17,636
|
|
|
|
0
|
|
|
|
0
|
|
Total Tax Reimbursements
|
|
|
5,979
|
|
|
|
5,979
|
|
|
|
21,814
|
|
|
|
4,188
|
|
|
|
4,804
|
|
Total All Other Compensation
|
|
|
89,964
|
|
|
|
57,865
|
|
|
|
178,358
|
|
|
|
26,438
|
|
|
|
27,054
|
|
|
|
|
*
|
|
Includes the aggregate incremental
cost to King of: aircraft operation; crew transportation, meals
and lodging; and aircraft handling, parking, de-icing and
maintenance.
|
30
2009
Grants of Plan Based Awards
The following table contains information on the companys
equity and non-equity incentive plan awards to named executive
officers during 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan
|
|
|
|
Estimated Future Payouts
Under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards (1)
|
|
|
|
Equity Incentive Plan Awards
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
|
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
(l)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
(k)
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Exercise or
|
|
|
Fair Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Securities
|
|
|
Base Price
|
|
|
Stock and
|
|
|
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or
|
|
|
Underlying
|
|
|
of Option
|
|
|
Option
|
|
(a)
|
|
Grant
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
|
Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
Name
|
|
Date
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
|
(#)(3)
|
|
|
(#)(4)
|
|
|
($/Sh) (5)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian A.
Markison
|
|
|
|
|
|
|
|
495,000
|
|
|
|
990,000
|
|
|
|
1,980,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,800
|
|
|
|
59,600
|
|
|
|
119,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
430,908
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,540
|
|
|
|
139,080
|
|
|
|
278,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
969,388
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,470
|
|
|
|
|
|
|
|
|
|
|
|
553,906
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,970
|
|
|
|
6.97
|
|
|
|
746,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
Squicciarino
|
|
|
|
|
|
|
|
210,000
|
|
|
|
420,000
|
|
|
|
840,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,320
|
|
|
|
20,640
|
|
|
|
41,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149,227
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,085
|
|
|
|
48,170
|
|
|
|
96,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
335,745
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,520
|
|
|
|
|
|
|
|
|
|
|
|
191,814
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,910
|
|
|
|
6.97
|
|
|
|
258,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric J. Bruce
|
|
|
|
|
|
|
|
129,450
|
|
|
|
258,900
|
|
|
|
517,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,940
|
|
|
|
11,880
|
|
|
|
23,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,892
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,855
|
|
|
|
27,710
|
|
|
|
55,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,139
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,830
|
|
|
|
|
|
|
|
|
|
|
|
110,335
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
6.97
|
|
|
|
148,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James W. Elrod
|
|
|
|
|
|
|
|
140,400
|
|
|
|
280,800
|
|
|
|
561,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,440
|
|
|
|
12,880
|
|
|
|
25,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,122
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,030
|
|
|
|
30,060
|
|
|
|
60,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
209,518
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,170
|
|
|
|
|
|
|
|
|
|
|
|
119,675
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,230
|
|
|
|
6.97
|
|
|
|
161,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric G. Carter
|
|
|
|
|
|
|
|
130,200
|
|
|
|
260,400
|
|
|
|
520,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,970
|
|
|
|
11,940
|
|
|
|
23,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,326
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,935
|
|
|
|
27,870
|
|
|
|
55,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,254
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,930
|
|
|
|
|
|
|
|
|
|
|
|
111,032
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,290
|
|
|
|
6.97
|
|
|
|
149,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects grants pursuant to the
companys Incentive Plan in connection with the
companys 2009 EMIA program. Details regarding that
program, including actual payout amounts, may be found in the
Compensation Discussion and Analysis beginning on page 16.
|
|
(2)
|
|
Reflects Three-Year PSUs and
One-Year PSUs granted pursuant to the companys Incentive
Plan in connection with the 2009 LTIA program. Further details
regarding that program, including performance-based conditions,
may be found in the Compensation Discussion and Analysis
beginning on page 16.
|
|
(3)
|
|
Reflects restricted stock granted
pursuant to the companys Incentive Plan in connection with
the 2009 LTIA program. Further details regarding that program
may be found in the Compensation Discussion and Analysis
beginning on page 16.
|
|
(4)
|
|
Reflects stock options granted
pursuant to the companys Incentive Plan in connection with
the 2009 LTIA program. Further details regarding that program
may be found in the Compensation Discussion and Analysis
beginning on page 16.
|
|
(5)
|
|
The exercise price of each stock
option awarded to our named executive officers in 2009 is the
closing price of our common stock on the date of grant.
|
31
2009
Outstanding Equity Awards at Fiscal Year End
The following table discloses information relating to stock
options, restricted stock and performance share units held by
the named executive officers as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
|
(c)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
|
|
|
|
Option awards
|
|
|
Stock awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
Number of
|
|
|
Equity Incentive Plan
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of
|
|
|
Unearned
|
|
|
Awards: Market or
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Units
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Payout Value of
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Units
|
|
|
Units or Other
|
|
|
Unearned Shares,
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
That
|
|
|
of Stock That
|
|
|
Rights That
|
|
|
Units
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have
|
|
|
or Other Rights That
|
|
(a)
|
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Have Not Vested
|
|
Name
|
|
Grant Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Brian A.
Markison
|
|
|
3/8/2004
|
|
|
|
114,724
|
|
|
|
|
|
|
|
19.4600
|
|
|
|
3/8/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/8/2004
|
|
|
|
10,276
|
|
|
|
|
|
|
|
19.4600
|
|
|
|
3/8/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/15/2004
|
|
|
|
250,000
|
|
|
|
|
|
|
|
10.6700
|
|
|
|
7/15/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/20/2006
|
|
|
|
53,980
|
|
|
|
|
|
|
|
19.6800
|
|
|
|
3/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/21/2007
|
|
|
|
60,792
|
|
|
|
31,318
|
(1)
|
|
|
19.2900
|
|
|
|
3/21/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
59,924
|
|
|
|
121,666
|
(2)
|
|
|
8.9100
|
|
|
|
3/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
250,970
|
(3)
|
|
|
6.9700
|
|
|
|
3/23/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,830
|
(4)
|
|
|
574,604
|
|
|
|
|
|
|
|
|
|
|
|
|
12/14/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
(5)
|
|
|
2,454,000
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,500
|
(6)
|
|
|
705,525
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,470
|
(7)
|
|
|
975,097
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
201,260
|
(8)
|
|
|
2,469,460
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278,160
|
(9)
|
|
|
3,413,023
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,260
|
(13)
|
|
|
1,058,410
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,600
|
(14)
|
|
|
731,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
Squicciarino
|
|
|
3/20/2006
|
|
|
|
23,190
|
|
|
|
|
|
|
|
19.6800
|
|
|
|
3/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/21/2007
|
|
|
|
17,998
|
|
|
|
9,272
|
(1)
|
|
|
19.2900
|
|
|
|
3/21/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
22,275
|
|
|
|
45,225
|
(2)
|
|
|
8.9100
|
|
|
|
3/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
86,910
|
(3)
|
|
|
6.9700
|
|
|
|
3/23/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,870
|
(4)
|
|
|
170,185
|
|
|
|
|
|
|
|
|
|
|
|
|
5/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,500
|
(10)
|
|
|
1,294,485
|
|
|
|
|
|
|
|
|
|
|
|
|
12/14/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
(5)
|
|
|
981,600
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,370
|
(6)
|
|
|
262,210
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,520
|
(7)
|
|
|
337,670
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,820
|
(8)
|
|
|
918,041
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,340
|
(9)
|
|
|
1,182,092
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,060
|
(13)
|
|
|
393,376
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,640
|
(14)
|
|
|
253,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric J. Bruce
|
|
|
3/20/2006
|
|
|
|
16,580
|
|
|
|
|
|
|
|
19.6800
|
|
|
|
3/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/21/2007
|
|
|
|
11,800
|
|
|
|
6,080
|
(1)
|
|
|
19.2900
|
|
|
|
3/21/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
11,609
|
|
|
|
23,571
|
(2)
|
|
|
8.9100
|
|
|
|
3/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
50,000
|
(3)
|
|
|
6.9700
|
|
|
|
3/23/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,090
|
(4)
|
|
|
111,534
|
|
|
|
|
|
|
|
|
|
|
|
|
12/14/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,000
|
(5)
|
|
|
883,440
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,140
|
(6)
|
|
|
136,688
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,830
|
(7)
|
|
|
194,234
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,000
|
(8)
|
|
|
478,530
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,420
|
(9)
|
|
|
680,003
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,720
|
(13)
|
|
|
205,154
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,880
|
(14)
|
|
|
145,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James W. Elrod
|
|
|
3/4/2005
|
|
|
|
20,000
|
|
|
|
|
|
|
|
9.7850
|
|
|
|
3/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/18/2005
|
|
|
|
2,500
|
|
|
|
|
|
|
|
15.5600
|
|
|
|
10/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
|
(c)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
|
|
|
|
Option awards
|
|
|
Stock awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
Number of
|
|
|
Equity Incentive Plan
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of
|
|
|
Unearned
|
|
|
Awards: Market or
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Units
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Payout Value of
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Units
|
|
|
Units or Other
|
|
|
Unearned Shares,
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
That
|
|
|
of Stock That
|
|
|
Rights That
|
|
|
Units
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have
|
|
|
or Other Rights That
|
|
(a)
|
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Have Not Vested
|
|
Name
|
|
Grant Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
|
3/20/2006
|
|
|
|
9,920
|
|
|
|
|
|
|
|
19.6800
|
|
|
|
3/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/21/2007
|
|
|
|
7,603
|
|
|
|
3,917
|
(1)
|
|
|
19.2900
|
|
|
|
3/21/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
12,186
|
|
|
|
24,744
|
(2)
|
|
|
8.9100
|
|
|
|
3/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
54,230
|
(3)
|
|
|
6.9700
|
|
|
|
3/23/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,860
|
(4)
|
|
|
71,902
|
|
|
|
|
|
|
|
|
|
|
|
|
11/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(11)
|
|
|
1,227,000
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,700
|
(6)
|
|
|
143,559
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,170
|
(7)
|
|
|
210,676
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,940
|
(8)
|
|
|
502,334
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,120
|
(9)
|
|
|
737,672
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,540
|
(13)
|
|
|
215,216
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,880
|
(14)
|
|
|
158,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric G. Carter
|
|
|
3/21/2007
|
|
|
|
7,095
|
|
|
|
3,655
|
(1)
|
|
|
19.2900
|
|
|
|
3/21/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
11,299
|
|
|
|
22,941
|
(2)
|
|
|
8.9100
|
|
|
|
3/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
50,290
|
(3)
|
|
|
6.9700
|
|
|
|
3/23/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/24/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,800
|
(12)
|
|
|
157,056
|
|
|
|
|
|
|
|
|
|
|
|
|
3/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,460
|
(4)
|
|
|
66,994
|
|
|
|
|
|
|
|
|
|
|
|
|
11/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(11)
|
|
|
1,227,000
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,840
|
(6)
|
|
|
133,007
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,930
|
(7)
|
|
|
195,461
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,940
|
(8)
|
|
|
465,524
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,740
|
(9)
|
|
|
683,930
|
|
|
|
|
|
|
|
|
|
|
|
|
3/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,260
|
(13)
|
|
|
199,510
|
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,940
|
(14)
|
|
|
146,504
|
|
|
|
|
(1)
|
|
Thirty-three percent of the options
became exercisable on March 21, 2008, thirty-three percent
became exercisable on March 21, 2009 and the remaining
thirty-four percent became exercisable on March 21, 2010.
|
|
(2)
|
|
Thirty-three percent of the options
became exercisable on March 25, 2009, thirty-three percent
became exercisable on March 25, 2010 and the remaining
thirty-four percent will become exercisable on March 25,
2011.
|
|
(3)
|
|
Thirty-three percent of the options
became exercisable on March 23, 2010, thirty-three percent
will become exercisable on March 23, 2011 and the remaining
thirty-four percent will become exercisable on March 23,
2012.
|
|
(4)
|
|
Represents restricted stock which
vested on March 21, 2010.
|
|
(5)
|
|
Represents restricted stock which
vests on December 14, 2010.
|
|
(6)
|
|
Represents restricted stock which
vests on March 25, 2011.
|
|
(7)
|
|
Represents restricted stock which
vests on March 23, 2012.
|
|
(8)
|
|
One-Year PSUs which are payable in
stock following a restricted period ending on December 31,
2010.
|
|
(9)
|
|
One-Year PSUs which are payable in
stock following a restricted period ending on December 31,
2011.
|
|
(10)
|
|
Represents restricted stock which
vests on May 15, 2012.
|
|
(11)
|
|
Represents restricted stock which
vests on November 29, 2010.
|
|
(12)
|
|
Represents restricted stock which
vested on January 24, 2010.
|
|
(13)
|
|
Assumes stretch performance under
Three-Year PSUs granted in 2008 which will be paid in common
stock after December 31, 2010 based upon Kings
three-year total shareholder return (stock price appreciation
plus dividends) versus the returns of companies in the Dow Jones
U.S. Pharmaceuticals Index for the years 2008 through 2010. For
more information about Three-Year PSUs, see the Compensation
Discussion and Analysis beginning on page 16.
|
|
(14)
|
|
Assumes target performance under
Three-Year PSUs granted in 2009 which will be paid in common
stock after December 31, 2011 based upon Kings
three-year total shareholder return (stock price appreciation
plus dividends) versus the returns of companies in the Dow Jones
U.S. Pharmaceuticals Index for the years 2009 through 2011. For
more information about Three-Year PSUs, see the Compensation
Discussion and Analysis beginning on page 16.
|
33
2009
Option Exercises and Stock Vested
The following table provides information concerning stock awards
that vested during 2009 for each named executive officer. No
named executive officer exercised stock options during 2009.
|
|
|
|
|
|
|
|
|
|
|
(d)
|
|
(e)
|
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on
|
|
on
|
(a)
|
|
Vesting
|
|
Vesting
|
Name
|
|
(#)
|
|
($)
|
|
Brian A. Markison (1)
|
|
|
136,251
|
|
|
|
1,516,208
|
|
Joseph Squicciarino (2)
|
|
|
44,010
|
|
|
|
473,900
|
|
Eric J. Bruce (3)
|
|
|
29,550
|
|
|
|
315,410
|
|
James W. Elrod (4)
|
|
|
39,949
|
|
|
|
372,891
|
|
Eric G. Carter (5)
|
|
|
12,698
|
|
|
|
155,170
|
|
|
|
|
(1)
|
|
Includes 108,801 shares of
common stock issued pursuant to a 2007 grant of One-Year PSUs
and 27,450 shares of restricted stock granted in 2006 for
which the restrictions lapsed in 2009.
|
|
(2)
|
|
Includes 32,220 shares of
common stock issued pursuant to a 2007 grant of One-Year PSUs
and 11,790 shares of restricted stock granted in 2006 for
which the restrictions lapsed in 2009.
|
|
(3)
|
|
Includes 21,120 shares of
common stock issued pursuant to a 2007 grant of One-Year PSUs
and 8,430 shares of restricted stock granted in 2006 for
which the restrictions lapsed in 2009.
|
|
(4)
|
|
Includes 13,609 shares of
common stock issued pursuant to a 2007 grant of One-Year PSUs
and 26,340 shares of restricted stock granted in 2006 for
which the restrictions lapsed in 2009.
|
|
(5)
|
|
Includes 12,698 shares of
common stock issued pursuant to a 2007 grant of One-Year PSUs.
|
Pension
Benefits
King has no defined benefit program in which the named executive
officers are eligible to participate.
34
2009
Nonqualified Deferred Compensation
The King Pharmaceuticals, Inc. Deferred Compensation Plan is a
tax deferred compensation program for a limited number of
executives, including the named executive officers. It provides
a tax favorable vehicle for deferring cash compensation,
including base salary and awards pursuant to the EMIA program.
Under the plan, an executive may defer up to 75% of his or her
base salary and up to 90% of annual incentive pay. Deferred
balances are credited with gains or losses which mirror the
performance of benchmark investment funds selected by the
participant from among twelve available funds and eleven target
date funds. Deferred amounts are paid, at the participants
option, either in a lump sum or in annual installments over a
period of up to ten years for retirement or termination
distributions, or up to five years for scheduled in-service
withdrawals. King matches contributions to this plan to the
extent that deferrals reduce matching contributions otherwise
available under the 401(k) plan.
The following table contains information relating to the named
executive officers participation in Kings
non-qualified deferred compensation plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
(d)
|
|
(f)
|
|
|
Executive
|
|
Aggregate
|
|
Aggregate
|
(a)
|
|
Contributions In
|
|
Earnings In
|
|
Balance At Last
|
Name
|
|
Last FY ($)
|
|
Last FY ($) (2)
|
|
FYE ($) (3)
|
|
Brian A. Markison
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Joseph Squicciarino
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Eric J. Bruce
|
|
|
0
|
|
|
|
3,014
|
|
|
|
197,745
|
|
James W. Elrod
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Eric G. Carter
|
|
|
150,154
|
(1)
|
|
|
3,792
|
|
|
|
492,330
|
|
|
|
|
(1)
|
|
This amount reflects the deferral
of $144,000 from a 2008 EMIA award, which was paid in 2009, as
well as deferral of $6,154 of base salary for 2009. The latter
deferred amount is reflected in the salary column of the Summary
Compensation Table.
|
|
(2)
|
|
There are no above-market or
preferential earnings on deferred compensation. Consequently,
the Summary Compensation Table does not include earnings on
deferred amounts.
|
|
(3)
|
|
$196,066 of the amount reported for
Mr. Bruce previously was reported as compensation to him in the
Summary Compensation Table. None of the amount reported for Dr.
Carter previously has been reported in the Summary Compensation
Table because 2009 was the first year for which Dr. Carter was a
named executive officer.
|
Post-Termination
Payments
The Severance Plan was adopted by the Compensation and Human
Resources Committee of the Board of Directors in October 2007
and applies to all of the named executive officers, although an
offer letter between King and Mr. Markison also addresses
severance matters. This offer letter is discussed below.
Each executives receipt of the termination payments,
accelerated vesting and other benefits contemplated by
Kings Severance Plan is conditioned upon execution of a
Waiver, Release and Nonsolicitation, Noncompete and
Nondisclosure Agreement (the Waiver and Release
Agreement) within forty-five days of its provision to the
executive. This agreement would include, among other things,
customary noncompetition, nonsolicitation and confidentiality
covenants. The term of the obligations of the named executive
officer under the Waiver and Release Agreement will be equal to
the number of years used as the severance multiple, as described
below, or in the case of the confidentiality covenant will
survive indefinitely. If an executive breaches the Waiver and
Release Agreement: (1) there will be immediate and
permanent cessation of any severance payment or benefit to the
executive; (2) upon written demand, the executive will be
required to repay 90% of the amount of severance pay, severance
benefits
and/or
suspended equity awards previously paid or provided to the
executive and dependents; and (3) the executive will be
required to repay to the company its costs and expenses incurred
in enforcing the terms of the Waiver and Release Agreement.
Kings Severance Plan is designed to provide a severance
payment and certain benefits to an executive for a Qualifying
Separation (as defined below). It is also designed to provide an
enhanced severance payment for a Qualifying Separation in
connection with a Change in Control (as defined below). The
severance payment is payable in a lump sum within thirty days
after the expiration of any revocation period associated with
the Waiver and Release Agreement. The severance obligations will
be paid by the company or any successor entity.
35
If a Qualifying Separation occurs under the Severance Plan
within twenty-four months after a Change in Control, then the
named executive officer will be entitled to the following:
|
|
|
|
|
For the Chief Executive Officer, a severance payment equal to
three times the sum of (1) current annual salary and
(2) an amount equal to his target (mid-range) cash
incentive award; or, for the other named executive officers, two
times the sum of (1) current annual salary and (2) an
amount equal to the target (mid-range) cash incentive award;
|
|
|
|
Compensation for earned and unused vacation days;
|
|
|
|
Continuation of welfare benefits as described below;
|
|
|
|
Acceleration of all unvested equity awards; and
|
|
|
|
Additional tax gross up payments in order to compensate for any
tax liability imposed on change in control payments to the
extent these payments constitute excess parachute
payments under Section 280G of the Internal Revenue
Code of 1986, as amended (the Code).
|
If a Qualifying Separation occurs under the Severance Plan prior
to a Change in Control or more than twenty-four months after a
Change in Control, then the executive will be entitled to the
following:
|
|
|
|
|
For the Chief Executive Officer, a severance payment equal to
two times the sum of (1) current annual salary and
(2) the target (mid-range) cash incentive award; or, for
the other named executive officers, one and one-half times the
sum of (1) current annual salary and (2) the target
(mid-range) cash incentive award;
|
|
|
|
Compensation for earned and unused vacation days;
|
|
|
|
Continuation of welfare benefits as described below; and
|
|
|
|
Acceleration of all unvested equity awards.
|
The Compensation and Human Resources Committee has discretion
under the Severance Plan to use up to the stretch (top-range)
cash incentive bonus amount in place of the target (mid-range)
cash incentive bonus amount if it determines such an adjustment
to be appropriate.
Each payment made by the company under the terms of the
Severance Plan is intended to be (i) a separate payment for
the purposes of Section 409A of the Code, and
(ii) exempt from the application of Code Section 409A,
to the extent possible. If the company decides that the
executive is a specified employee, as that term is
defined by Treasury
Regulation 1.409A-1(i)(1),
and that payments made to the executive are or may become
subject to additional tax under Code Section 409A, then
payments to the executive will be (a) delayed for six
months after the executives termination, or such shorter
period as the company decides is necessary to avoid the
imposition of additional taxes under Code Section 409A, and
(b) increased by an amount equal to the interest (at prime
rate) on them for the period in which the payments were actually
delayed.
The Severance Plan provides for the continuation of coverage
under Kings welfare benefit plans for which the executive
was eligible and participating on the date of the termination
described above. These benefits would have the same terms and
conditions (exclusive of any tax consequences to the recipient
on resulting coverage or benefits) as if the executive were
still an active employee of King, including dependent coverage
where applicable. These benefits would end on the earliest of
(a) eighteen months beginning on the date of the
termination described above, (b) the end of the period for
which severance pay is calculated, (c) the date of any
material breach of the provisions of the Severance 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. The executive must notify
King in writing within seven days after becoming eligible for
alternate coverage. At the end of the period of continued
coverage, the executive would be eligible to elect to continue
company-sponsored medical coverage under the Consolidated
Omnibus Budget Reconciliation Act (COBRA), as defined in
Section 4980B of the Code, by paying such amounts as COBRA
may require.
A Qualifying Separation is defined under Kings
Severance Plan to mean separation from the company:
|
|
|
|
|
within twenty-four months following the date on which a Change
in Control occurs, either (a) for Good Reason or
(b) initiated by the company or its successor without Cause
(as defined below); or
|
|
|
|
not following a Change in Control, whether (a) for Good
Reason or (b) initiated by the company without Cause.
|
36
Kings Severance Plan defines Good Reason to
mean:
|
|
|
|
|
Implementation of a material diminution in the nature or status
of the executives authority, duties, responsibilities,
reporting relationships, title
and/or
position (except that a reduction in the number of employees
reporting to the executive will not, by itself, constitute Good
Reason). Material diminution will be determined, in the case of
a Change in Control only, with reference to the executives
situation as in effect as of thirty days prior to the Change in
Control, determined in the context of the individuals
relative position in the overall controlled group which includes
the company immediately prior to a Change in Control as compared
to the individuals position in the overall controlled
group which includes the company immediately after a Change in
Control;
|
|
|
|
Failure to pay promptly any material compensation when due;
|
|
|
|
Material reduction in the rate of annual base salary without the
executives consent;
|
|
|
|
Material breach by King of any employment contract or other
agreement as to the terms and conditions of employment; or
|
|
|
|
Requiring the executive to be based at a work site in excess of
fifty miles from the current location of the executives
principal job location or office.
|
The executive must provide notice to the company of the
existence of one of the above conditions constituting Good
Reason within thirty days of its discovery. King will then have
thirty days to cure the condition, and, if the company fails to
do so, the executive may then effect a separation of service for
Good Reason within thirty days after the expiration of the cure
period or else waive the right to do so.
Kings Severance Plan defines Cause to mean:
|
|
|
|
|
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;
|
|
|
|
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 companys
reputation, operations, properties, or business or employee
relationships;
|
|
|
|
By action or inaction, failing or refusing faithfully and
conscientiously to perform one or more material assignments or
responsibilities of the executives position;
|
|
|
|
Failing or refusing to look after the best interests of the
company committed to the executives care;
|
|
|
|
Failing or refusing reasonably to advance the interests of the
company;
|
|
|
|
Failing to devote full time, attention and energy to the
business of the company; or
|
|
|
|
Failing to devote best efforts to the business of the company.
|
Kings Severance Plan defines Change in Control
to mean:
|
|
|
|
|
The sale of substantially all of the assets of the
company; or
|
|
|
|
Any person or group (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act),
other than the executive officers, is or becomes the
beneficial owner (as defined in
Rules 13d-3
and 13d-5
under the Exchange Act except that for purposes of the Severance
Plan a person is deemed to have beneficial ownership
of all securities that such person has the right to acquire),
directly or indirectly, of more than thirty-five percent of the
total voting stock of the company;
|
|
|
|
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
|
37
|
|
|
|
|
no person or group (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act),
other than the executive officers, is the beneficial owner (as
defined above), directly or indirectly, of more than thirty-five
percent of the total voting stock of the surviving or transferee
corporation; or
|
|
|
|
|
|
A majority of members of the companys Board of Directors
is replaced during any twelve-month period by directors whose
appointment or election is not endorsed by a majority of the
members of the companys Board of Directors prior to the
date of the appointment or election.
|
Post-Termination
Payments for Mr. Markison
Effective on July 15, 2004, Mr. Markison agreed to an
offer letter whereby he became President and Chief Executive
Officer of King. If Mr. Markisons employment is
terminated while the offer letter is in effect either
(a) by King other than for cause, or
(b) by Mr. Markison for good reason, King
will pay Mr. Markison a lump-sum cash severance payment
equal to two times the sum of:
|
|
|
|
|
his base salary at the time of termination of his
employment, and
|
|
|
|
his target cash incentive bonus for the year of termination
(which amount would not be pro-rated based on the date of his
termination).
|
Also, in the event of termination of Mr. Markisons
employment for these reasons,
|
|
|
|
|
King would continue to provide Mr. Markison with health and
welfare benefits generally made available to King executives
until the second anniversary of his termination of employment,
provided that this obligation would end if he became covered by
the employee benefits plans of a subsequent employer;
|
|
|
|
all unvested stock options awarded to Mr. Markison would
immediately become fully vested; and
|
|
|
|
in the event that any payments he received were considered
excess parachute payments under Section 280G of
the Code, he would be entitled to a
gross-up
payment to make him whole for any excise tax imposed on him
under Section 4999 of the Code (and such
gross-up
payment would include amounts to make him whole for the Federal,
state and local income and excise taxes owing with respect to
the gross-up
payment).
|
Under Mr. Markisons offer letter, cause
includes:
|
|
|
|
|
conviction of, or plea of guilty or no contest to, a felony,
|
|
|
|
embezzlement,
|
|
|
|
the illegal use of drugs,
|
|
|
|
a material violation of law, regulation or written company
policy which, in the good faith belief of the Board, is conduct
so unacceptable as to prohibit the Board from continuing to
maintain him in the position of Chief Executive Officer, or
|
|
|
|
if no change in control has occurred, his failure
(other than as a result of physical or mental illness or
incapacity) to substantially perform his duties to the company
as determined by the Board.
|
Mr. Markisons offer letter defines good
reason to mean:
|
|
|
|
|
a reduction of his compensation or benefits, responsibilities,
duties, authority, reporting relationships, title
and/or
position (in each case other than his position, if any, as
director of King or any subsidiary or as an officer of any
subsidiary), unless other similarly situated senior executives
of King are required to accept a similar reduction, and
excluding any isolated, insubstantial and inadvertent action not
taken in bad faith and that is remedied by King promptly after
receipt of notice from Mr. Markison; provided, however,
that Mr. Markison will not have good reason if
any such reduction is merely as a result of Kings ceasing
to be a publicly traded company in connection with a change in
control or as a result of Kings (or its successors)
becoming a subsidiary of another company,
|
|
|
|
the company, without his consent, requires him to relocate
(which term shall not include travel) to a location more than
fifty miles from his current residence,
|
38
|
|
|
|
|
the failure to pay to him any compensation or benefits due him,
other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and that is remedied by King promptly
after receipt of notice thereof given by
Mr. Markison, or
|
|
|
|
Kings material breach of any provision of
Mr. Markisons offer letter.
|
If Mr. Markisons employment is terminated while the
offer letter is in effect (a) by King other than for
cause, or (b) by Mr. Markison for
good reason, in each case during the two-year period
following a change in control, King will pay Mr. Markison a
lump-sum cash severance payment equal to three times the sum of:
|
|
|
|
|
his base salary at the time of termination of his
employment, and
|
|
|
|
his target cash incentive bonus for the year of termination
(which amount would not be pro-rated based on the date of his
termination).
|
Also, in the event of termination of Mr. Markisons
employment for these reasons,
|
|
|
|
|
King would continue to provide him with health and welfare
benefits generally made available to the companys
executives until the third anniversary of his termination of
employment, provided that such obligation would cease if he
became covered by the employee benefits plans of a subsequent
employer,
|
|
|
|
all unvested stock options awarded to Mr. Markison under
the stock option plan would immediately become fully
vested, and
|
|
|
|
in the event that any payments he received were considered
excess parachute payments under Section 280G of
the Code, he would be entitled to a
gross-up
payment to make him whole for any excise tax imposed on him
under Section 4999 of the Code (and such
gross-up
payment would include amounts to make him whole for the Federal,
state and local income and excise taxes owing with respect to
the gross-up
payment).
|
Mr. Markisons receipt of the termination payments and
other benefits contemplated by his offer letter is conditioned
upon his execution of an agreement and release at the time of
his severance. The agreement and release would include, among
other things, customary non-competition and non-solicitation
covenants with a term that will not exceed one year, and a
customary confidentiality covenant.
Mr. Markisons offer letter defines change in
control to mean:
|
|
|
|
|
The sale of substantially all of Kings assets;
|
|
|
|
Any person or group (as these terms are
used in Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the beneficial owner (as defined in
Rules 13d-3
and 13d-5
under the Exchange Act, except that a person will be deemed to
have beneficial ownership of all securities that
such person has the right to acquire at any time), directly or
indirectly, of more than fifty percent of the total voting stock
of King;
|
|
|
|
King 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, in one
transaction or a series of transactions, to any person or any
person consolidates with, or merges with or into, King, in any
such event pursuant to a transaction in which any voting stock
of King is reclassified or changed into or exchanged for cash,
securities or other property, other than any such transaction
where (A) any voting stock of King is reclassified or
changed into or exchanged for non-redeemable voting stock of the
surviving or transferee corporation and (B) immediately
after such transaction no person or
group (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is the beneficial owner (as
defined above), directly or indirectly, of more than fifty
percent of the total voting stock of the surviving or transferee
corporation; or
|
|
|
|
During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board (together with
any new directors whose election by the shareholders of King was
approved by a vote of
662/3%
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 then in office.
|
39
The potential amounts payable to Mr. Markison in connection
with the termination of his employment, and the circumstances
under which they are payable, are set forth in the following
table. This table assumes that the relevant triggering event
occurred on the last day of the last completed fiscal year,
December 31, 2009, and apply the closing price of the
companys common stock on that day, $12.27.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
(h)
|
|
|
|
(i)
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Involuntary
|
|
|
|
Without
|
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian A. Markison
|
|
|
Without
|
|
|
|
Termination
|
|
|
|
Good
|
|
|
|
For Good
|
|
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
President and Chief Executive Officer
|
|
|
Cause
|
|
|
|
For Cause
|
|
|
|
Reason
|
|
|
|
Reason
|
|
|
|
(1)
|
|
|
|
Death
|
|
|
|
Disability
|
|
|
|
Control (4)
|
|
|
|
|
(In Dollars)
|
|
Benefits Earned Prior to Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of unexercised vested stock options
|
|
|
|
601,345
|
|
|
|
|
0
|
|
|
|
|
601,345
|
|
|
|
|
601,345
|
|
|
|
|
N/A
|
|
|
|
|
601,345
|
|
|
|
|
601,345
|
|
|
|
|
601,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) plan balance
|
|
|
|
136,500
|
|
|
|
|
136,500
|
|
|
|
|
136,500
|
|
|
|
|
136,500
|
|
|
|
|
N/A
|
|
|
|
|
136,500
|
|
|
|
|
136,500
|
|
|
|
|
136,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive deferred comp. plan balance
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Already Earned
|
|
|
|
737,845
|
|
|
|
|
136,500
|
|
|
|
|
737,845
|
|
|
|
|
737,845
|
|
|
|
|
N/A
|
|
|
|
|
737,845
|
|
|
|
|
737,845
|
|
|
|
|
737,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Payments Earned
Upon Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance
|
|
|
|
3,960,000
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,960,000
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
5,940,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity incentive for year of termination
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of unvested stock options(2)
|
|
|
|
1,738,939
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,738,939
|
|
|
|
|
N/A
|
|
|
|
|
1,738,939
|
|
|
|
|
1,738,939
|
|
|
|
|
1,738,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of restricted stock and One-
Year PSUs(2)(3)
|
|
|
|
10,591,709
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
10,591,709
|
|
|
|
|
N/A
|
|
|
|
|
10,591,709
|
|
|
|
|
10,591,709
|
|
|
|
|
10,591,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of Three-Year PSUs(2)
|
|
|
|
1,260,497
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,260,497
|
|
|
|
|
N/A
|
|
|
|
|
1,260,497
|
|
|
|
|
1,260,497
|
|
|
|
|
1,260,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and welfare continuation
|
|
|
|
28,251
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
28,251
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
42,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial planning
|
|
|
|
35,802
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
35,802
|
|
|
|
|
N/A
|
|
|
|
|
35,802
|
|
|
|
|
35,802
|
|
|
|
|
53,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sec. 280(G) excise tax and related
gross-up
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
4,005,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl Payments Due to Termination
|
|
|
|
17,615,198
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
17,615,198
|
|
|
|
|
N/A
|
|
|
|
|
13,626,947
|
|
|
|
|
13,626,947
|
|
|
|
|
23,633,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
18,353,043
|
|
|
|
|
136,500
|
|
|
|
|
737,845
|
|
|
|
|
18,353,043
|
|
|
|
|
N/A
|
|
|
|
|
14,364,792
|
|
|
|
|
14,364,792
|
|
|
|
|
24,370,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Mr. Markison is not eligible to
receive retirement benefits.
|
|
(2)
|
|
Treatment of unvested awards upon
termination without cause and for good reason is governed by an
offer letter dated July 15, 2004 and the Severance Plan.
|
|
(3)
|
|
Includes One-Year PSUs earned
during fiscal years 2008 and 2009 but which are not yet vested.
|
|
(4)
|
|
Reflects benefits provided upon a
Change in Control followed by termination for good reason or
involuntary termination without cause within 24 months
thereafter.
|
40
Post-Termination
Payments for Mr. Squicciarino, Mr. Bruce,
Mr. Elrod and Dr. Carter
Messrs. Squicciarino, Bruce, Elrod and Dr. Carter are
eligible for our Severance Plan, which is described earlier in
this section. The potential amounts payable to each executive in
connection with termination of employment, and the circumstances
under which they are payable, are set forth in the following
tables. These tables assume that the relevant triggering event
occurred on the last day of the last completed fiscal year,
December 31, 2009, and apply the closing price of the
companys common stock on that day, $12.27.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
(h)
|
|
|
|
(i)
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Involuntary
|
|
|
|
Without
|
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Squicciarino
|
|
|
Without
|
|
|
|
Termination
|
|
|
|
Good
|
|
|
|
For Good
|
|
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
Chief Financial Officer
|
|
|
Cause
|
|
|
|
For Cause
|
|
|
|
Reason
|
|
|
|
Reason
|
|
|
|
(1)
|
|
|
|
Death
|
|
|
|
Disability
|
|
|
|
Control (4)
|
|
|
|
|
(In Dollars)
|
|
Benefits Earned Prior to Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of unexercised vested stock options
|
|
|
|
74,844
|
|
|
|
|
0
|
|
|
|
|
74,844
|
|
|
|
|
74,844
|
|
|
|
|
N/A
|
|
|
|
|
74,844
|
|
|
|
|
74,844
|
|
|
|
|
74,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) plan balance
|
|
|
|
137,424
|
|
|
|
|
137,424
|
|
|
|
|
137,424
|
|
|
|
|
137,424
|
|
|
|
|
N/A
|
|
|
|
|
137,424
|
|
|
|
|
137,424
|
|
|
|
|
137,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive deferred comp. plan balance
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Already Earned
|
|
|
|
212,268
|
|
|
|
|
137,424
|
|
|
|
|
212,268
|
|
|
|
|
212,268
|
|
|
|
|
N/A
|
|
|
|
|
212,268
|
|
|
|
|
212,268
|
|
|
|
|
212,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Payments Earned
Upon Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance
|
|
|
|
1,530,000
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,530,000
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,040,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity incentive for year of termination
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of unvested stock options (2)
|
|
|
|
612,579
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
612,579
|
|
|
|
|
N/A
|
|
|
|
|
612,579
|
|
|
|
|
612,579
|
|
|
|
|
612,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of restricted stock and One-Year
PSUs (2)(3)
|
|
|
|
5,146,283
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
5,146,283
|
|
|
|
|
N/A
|
|
|
|
|
5,146,283
|
|
|
|
|
5,146,283
|
|
|
|
|
5,146,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of Three-Year PSUs(2)
|
|
|
|
449,941
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
449,941
|
|
|
|
|
N/A
|
|
|
|
|
449,941
|
|
|
|
|
449,941
|
|
|
|
|
449,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and welfare continuation
|
|
|
|
21,189
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
21,189
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
21,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial planning
|
|
|
|
35,802
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
35,802
|
|
|
|
|
N/A
|
|
|
|
|
35,802
|
|
|
|
|
35,802
|
|
|
|
|
53,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sec. 280(G) excise tax and related
gross-up
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl Payments Due to Termination
|
|
|
|
7,795,794
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
7,795,794
|
|
|
|
|
N/A
|
|
|
|
|
6,244,605
|
|
|
|
|
6,244,605
|
|
|
|
|
8,323,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
8,008,062
|
|
|
|
|
137,424
|
|
|
|
|
212,268
|
|
|
|
|
8,008,062
|
|
|
|
|
N/A
|
|
|
|
|
6,456,873
|
|
|
|
|
6,456,873
|
|
|
|
|
8,535,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Mr. Squicciarino is not eligible to
receive retirement benefits.
|
|
(2)
|
|
Treatment of unvested awards upon
termination without cause and for good reason is governed by the
Severance Plan.
|
|
(3)
|
|
Includes One-Year PSUs earned
during fiscal years 2008 and 2009 but which are not yet vested.
|
|
(4)
|
|
Reflects benefits provided upon a
Change in Control followed by termination for good reason or
involuntary termination without cause within 24 months
thereafter.
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
(h)
|
|
|
|
(i)
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Involuntary
|
|
|
|
Resignation
|
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric J. Bruce
|
|
|
Without
|
|
|
|
Termination
|
|
|
|
Without Good
|
|
|
|
For Good
|
|
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
President, Alpharma Animal Health
|
|
|
Cause
|
|
|
|
For Cause
|
|
|
|
Reason
|
|
|
|
Reason
|
|
|
|
(1)
|
|
|
|
Death
|
|
|
|
Disability
|
|
|
|
Control (4)
|
|
|
|
|
(In Dollars)
|
|
Benefits Earned Prior to Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of unexercised vested
stock options
|
|
|
|
39,006
|
|
|
|
|
0
|
|
|
|
|
39,006
|
|
|
|
|
39,006
|
|
|
|
|
N/A
|
|
|
|
|
39,006
|
|
|
|
|
39,006
|
|
|
|
|
39,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) plan balance
|
|
|
|
126,757
|
|
|
|
|
126,757
|
|
|
|
|
126,757
|
|
|
|
|
126,757
|
|
|
|
|
N/A
|
|
|
|
|
126,757
|
|
|
|
|
126,757
|
|
|
|
|
126,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive deferred comp.
plan balance
|
|
|
|
197,745
|
|
|
|
|
197,745
|
|
|
|
|
197,745
|
|
|
|
|
197,745
|
|
|
|
|
N/A
|
|
|
|
|
197,745
|
|
|
|
|
197,745
|
|
|
|
|
197,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Already Earned
|
|
|
|
363,508
|
|
|
|
|
324,502
|
|
|
|
|
363,508
|
|
|
|
|
363,508
|
|
|
|
|
N/A
|
|
|
|
|
363,508
|
|
|
|
|
363,508
|
|
|
|
|
363,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Payments Earned
Upon Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
1,035,600
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,035,600
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,380,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity incentive for year
of termination
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of unvested
stock options (2)
|
|
|
|
344,199
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
344,199
|
|
|
|
|
N/A
|
|
|
|
|
344,199
|
|
|
|
|
344,199
|
|
|
|
|
344,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of restricted
stock and One-Year PSUs (2)(3)
|
|
|
|
2,484,429
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,484,429
|
|
|
|
|
N/A
|
|
|
|
|
2,484,429
|
|
|
|
|
2,484,429
|
|
|
|
|
2,484,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of
Three-Year PSUs (2)
|
|
|
|
248,345
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
248,345
|
|
|
|
|
N/A
|
|
|
|
|
248,345
|
|
|
|
|
248,345
|
|
|
|
|
248,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and welfare continuation
|
|
|
|
21,189
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
21,189
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
21,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial planning
|
|
|
|
35,802
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
35,802
|
|
|
|
|
N/A
|
|
|
|
|
35,802
|
|
|
|
|
35,802
|
|
|
|
|
53,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sec. 280(G) excise tax and
related
gross-up
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl Payments Due to Termination
|
|
|
|
4,169,564
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
4,169,564
|
|
|
|
|
N/A
|
|
|
|
|
3,112,775
|
|
|
|
|
3,112,775
|
|
|
|
|
4,532,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
4,533,072
|
|
|
|
|
324,502
|
|
|
|
|
363,508
|
|
|
|
|
4,533,072
|
|
|
|
|
N/A
|
|
|
|
|
3,476,283
|
|
|
|
|
3,476,283
|
|
|
|
|
4,896,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Mr. Bruce is not eligible to
receive retirement benefits.
|
|
(2)
|
|
Treatment of unvested awards upon
termination without cause and for good reason is governed by
Severance Plan.
|
|
(3)
|
|
Includes One-Year PSUs earned
during fiscal years 2008 and 2009 but which are not yet vested.
|
|
(4)
|
|
Reflects benefits provided upon a
Change in Control followed by termination for good reason or
involuntary termination without cause within 24 months
thereafter.
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
(h)
|
|
|
|
(i)
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Involuntary
|
|
|
|
Resignation
|
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James W. Elrod
|
|
|
Without
|
|
|
|
Termination
|
|
|
|
Without Good
|
|
|
|
For Good
|
|
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
Chief Legal Officer and Secretary
|
|
|
Cause
|
|
|
|
For Cause
|
|
|
|
Reason
|
|
|
|
Reason
|
|
|
|
(1)
|
|
|
|
Death
|
|
|
|
Disability
|
|
|
|
Control (4)
|
|
|
|
|
(In Dollars)
|
|
Benefits Earned Prior to Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of unexercised vested
stock options
|
|
|
|
90,645
|
|
|
|
|
0
|
|
|
|
|
90,645
|
|
|
|
|
90,645
|
|
|
|
|
N/A
|
|
|
|
|
90,645
|
|
|
|
|
90,645
|
|
|
|
|
90,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) plan balance
|
|
|
|
186,982
|
|
|
|
|
186,982
|
|
|
|
|
186,982
|
|
|
|
|
186,982
|
|
|
|
|
N/A
|
|
|
|
|
186,982
|
|
|
|
|
186,982
|
|
|
|
|
186,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive deferred comp.
plan balance
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Already Earned
|
|
|
|
277,627
|
|
|
|
|
186,982
|
|
|
|
|
277,627
|
|
|
|
|
277,627
|
|
|
|
|
N/A
|
|
|
|
|
277,627
|
|
|
|
|
277,627
|
|
|
|
|
277,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Payments Earned
Upon Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance
|
|
|
|
1,123,200
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,123,200
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,497,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity incentive for year
of termination
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of unvested
stock options (2)
|
|
|
|
370,559
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
370,559
|
|
|
|
|
N/A
|
|
|
|
|
370,559
|
|
|
|
|
370,559
|
|
|
|
|
370,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of restricted
stock and One-Year PSUs (2)(3)
|
|
|
|
2,893,143
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,893,143
|
|
|
|
|
N/A
|
|
|
|
|
2,893,143
|
|
|
|
|
2,893,143
|
|
|
|
|
2,893,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of
Three-Year PSUs (2)
|
|
|
|
265,646
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
265,646
|
|
|
|
|
N/A
|
|
|
|
|
265,646
|
|
|
|
|
265,646
|
|
|
|
|
265,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and welfare continuation
|
|
|
|
21,189
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
21,189
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
21,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial planning
|
|
|
|
33,220
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
33,220
|
|
|
|
|
N/A
|
|
|
|
|
33,220
|
|
|
|
|
33,220
|
|
|
|
|
49,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sec. 280(G) excise tax and
related
gross-up
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
911,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl Payments Due to Termination
|
|
|
|
4,706,957
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
4,706,957
|
|
|
|
|
N/A
|
|
|
|
|
3,562,568
|
|
|
|
|
3,562,568
|
|
|
|
|
6,009,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
4,984,584
|
|
|
|
|
186,982
|
|
|
|
|
277,627
|
|
|
|
|
4,984,584
|
|
|
|
|
N/A
|
|
|
|
|
3,840,195
|
|
|
|
|
3,840,195
|
|
|
|
|
6,286,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Mr. Elrod is not eligible to
receive retirement benefits.
|
|
(2)
|
|
Treatment of unvested awards upon
termination without cause and for good reason governed by
Severance Plan.
|
|
(3)
|
|
Includes One-Year PSUs earned
during fiscal years 2008 and 2009 but which are not yet vested.
|
|
(4)
|
|
Reflects benefits provided upon a
Change in Control followed by termination for good reason or
involuntary termination without cause within 24 months
thereafter.
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
(h)
|
|
|
|
(i)
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Involuntary
|
|
|
|
Resignation
|
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric G. Carter
|
|
|
Without
|
|
|
|
Termination
|
|
|
|
Without Good
|
|
|
|
For Good
|
|
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
Chief Science Officer
|
|
|
Cause
|
|
|
|
For Cause
|
|
|
|
Reason
|
|
|
|
Reason
|
|
|
|
(1)
|
|
|
|
Death
|
|
|
|
Disability
|
|
|
|
Control (4)
|
|
|
|
|
(In Dollars)
|
|
Benefits Earned Prior to Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of unexercised vested
stock options
|
|
|
|
37,965
|
|
|
|
|
0
|
|
|
|
|
37,965
|
|
|
|
|
37,965
|
|
|
|
|
N/A
|
|
|
|
|
37,965
|
|
|
|
|
37,965
|
|
|
|
|
37,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) plan balance
|
|
|
|
78,484
|
|
|
|
|
78,484
|
|
|
|
|
78,484
|
|
|
|
|
78,484
|
|
|
|
|
N/A
|
|
|
|
|
78,484
|
|
|
|
|
78,484
|
|
|
|
|
78,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive deferred comp.
plan balance
|
|
|
|
492,330
|
|
|
|
|
492,330
|
|
|
|
|
492,330
|
|
|
|
|
492,330
|
|
|
|
|
N/A
|
|
|
|
|
492,330
|
|
|
|
|
492,330
|
|
|
|
|
492,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Already Earned
|
|
|
|
608,779
|
|
|
|
|
570,814
|
|
|
|
|
608,779
|
|
|
|
|
608,779
|
|
|
|
|
N/A
|
|
|
|
|
608,779
|
|
|
|
|
608,779
|
|
|
|
|
608,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Payments Earned
Upon Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance
|
|
|
|
1,041,600
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,041,600
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,388,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity incentive for year
of termination
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of unvested
stock options (2)
|
|
|
|
343,619
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
343,619
|
|
|
|
|
N/A
|
|
|
|
|
343,619
|
|
|
|
|
343,619
|
|
|
|
|
343,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of restricted
stock and One-Year PSUs (2)(3)
|
|
|
|
2,928,972
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,928,972
|
|
|
|
|
N/A
|
|
|
|
|
2,928,972
|
|
|
|
|
2,928,972
|
|
|
|
|
2,928,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl value due to vesting of
Three-Year PSUs (2)
|
|
|
|
246,259
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
246,259
|
|
|
|
|
N/A
|
|
|
|
|
246,259
|
|
|
|
|
246,259
|
|
|
|
|
246,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and welfare continuation
|
|
|
|
13,905
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
13,905
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
13,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial planning
|
|
|
|
34,595
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
34,595
|
|
|
|
|
N/A
|
|
|
|
|
34,595
|
|
|
|
|
34,595
|
|
|
|
|
51,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sec. 280(G) excise tax and
related
gross-up
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
948,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addl Payments Due to Termination
|
|
|
|
4,608,950
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
4,608,950
|
|
|
|
|
N/A
|
|
|
|
|
3,553,445
|
|
|
|
|
3,553,445
|
|
|
|
|
5,921,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
5,217,729
|
|
|
|
|
570,814
|
|
|
|
|
608,779
|
|
|
|
|
5,217,729
|
|
|
|
|
N/A
|
|
|
|
|
4,162,224
|
|
|
|
|
4,162,224
|
|
|
|
|
6,530,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Dr. Carter is not eligible to
receive retirement benefits.
|
|
(2)
|
|
Treatment of unvested awards upon
termination without cause and for good reason governed by
Severance Plan.
|
|
(3)
|
|
Includes One-Year PSUs earned
during fiscal years 2008 and 2009 but which are not yet vested.
|
|
(4)
|
|
Reflects benefits provided upon a
Change in Control followed by termination for good reason or
involuntary termination without cause within 24 months
thereafter.
|
44
2009 Director
Compensation
Our Board of Directors believes that our non-employee directors
should be compensated according to the following key principles:
|
|
|
|
|
the interests of directors should be closely aligned with those
of shareholders through equity-based compensation; and
|
|
|
|
directors cash and equity compensation should approximate
the median compensation paid to directors of the companies in
the Comparator Group.
|
The following table describes the compensation received by our
non-employee directors for 2009. Mr. Crutchfield and
Dr. Schaffer were not appointed to the Board until February
2010 and so do not appear in this table. Mr. Markison
received no additional compensation for his service as Chairman
of the Board or as a director.
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(g)
|
|
(h)
|
|
|
|
|
|
|
Option
|
|
All Other
|
|
|
|
|
Fees Earned Or Paid
|
|
Stock Awards
|
|
Awards
|
|
Compensation
|
|
Total
|
Name
|
|
In Cash ($) (1)
|
|
($) (2)
|
|
($)(3)
|
|
($)
|
|
($)
|
|
Ted G. Wood
|
|
|
104,500
|
|
|
134,997
|
|
0
|
|
0
|
|
239,497
|
Earnest W. Deavenport, Jr.
|
|
|
93,000
|
(4)
|
|
134,997
|
|
0
|
|
0
|
|
227,997
|
Elizabeth M. Greetham
|
|
|
72,000
|
|
|
134,997
|
|
0
|
|
0
|
|
206,997
|
Philip A. Incarnati
|
|
|
66,000
|
|
|
134,997
|
|
0
|
|
0
|
|
200,997
|
Gregory D. Jordan
|
|
|
88,722
|
|
|
134,997
|
|
0
|
|
0
|
|
223,719
|
R. Charles Moyer
|
|
|
91,500
|
|
|
134,997
|
|
0
|
|
0
|
|
226,497
|
D. Greg Rooker
|
|
|
67,500
|
|
|
134,997
|
|
0
|
|
0
|
|
202,497
|
|
|
|
(1)
|
|
Excludes amounts paid in 2009 for
service in 2008 and includes amounts paid in 2010 for service in
2009.
|
|
(2)
|
|
As of December 31, 2009, each
of the non-management directors held 15,358 restricted stock
units. Each restricted stock unit entitles the holder to receive
one share of Kings common stock upon vesting. Directors
may elect between two payout schedules for each restricted stock
unit award, one that provides for payout on the first
anniversary of the grant date and another that provides for
payout six months after the directors service on the Board
is complete, each subject to certain conditions. Restricted
stock units held by Mr. Deavenport, Mr. Incarnati,
Dr. Jordan and Dr. Moyer are scheduled to vest as of
May 15, 2010 or earlier upon the occurrence of certain
events. Restricted stock units held by Mr. Wood,
Ms. Greetham and Mr. Rooker will vest on a date within
six months from their respective departures from the Board of
Directors. The grant date fair value of the restricted stock
units issued to the directors during 2009 was $134,997 each.
|
|
(3)
|
|
The following table lists the
number of stock options held by each non-management director as
of December 31, 2009. All options were fully exercisable as
of that date.
|
|
|
|
|
|
|
|
Stock Options Held
|
Name
|
|
at Fiscal Year End
|
|
Ted G. Wood
|
|
|
26,794
|
|
Earnest W. Deavenport, Jr.
|
|
|
53,333
|
|
Elizabeth M. Greetham
|
|
|
24,904
|
|
Philip A. Incarnati
|
|
|
0
|
|
Gregory D. Jordan
|
|
|
40,000
|
|
R. Charles Moyer
|
|
|
53,333
|
|
D. Greg Rooker
|
|
|
73,333
|
|
|
|
|
(4)
|
|
Mr. Deavenport deferred 100%
of this amount through the King Pharmaceuticals, Inc.
Non-Employee Directors Deferred Compensation Plan.
|
In 2009, non-employee directors received an annual retainer of
$40,000 and a fee of $2,000 for each Board meeting they
attended. They also received $1,500 for each committee meeting
attended. Mr. Wood received an annual retainer of $25,000,
paid quarterly, for his service as Lead Independent Director in
2009. The chair of the Audit Committee received an annual
retainer of $13,500, and each other committee chair received an
annual retainer of $9,000. Upon his appointment as chair of the
Nominating and Corporate Governance Committee in June 2009,
Mr. Wood declined the annual retainer associated with that
chairmanship because he already receives a retainer in
connection with his service as Lead Independent Director.
Non-employee directors were reimbursed for reasonable and
customary expenses associated with attending continuing
education programs. They were also entitled to use corporate
aircraft for personal use for up to 10 hours per year, but
only in connection with flights for which Kings business
was the primary purpose. No director used corporate aircraft for
45
personal purposes in 2009. Any such personal use of aircraft
would have been treated as compensation to the director as
required by the Internal Revenue Code. The incremental cost to
King of personal use of corporate aircraft includes: aircraft
operation; crew transportation, meals and lodging; and aircraft
handling, parking, de-icing and maintenance.
Restricted stock units related to Kings common stock, are
automatically granted to each non-employee director on May 15 of
each year, or, if May 15 falls on a weekend or holiday, on the
first business day immediately preceding May 15. Upon
becoming a director (other than through re-election), a
non-employee director automatically receives, upon the first day
of service as a director, a pro rata portion of the annual
restricted stock unit grant, based on the time period between
the non-employee directors first date of service and the
first May 15 thereafter. In 2009, the value of the annual grant
to each
non-employee
director was approximately $135,000. Beginning with the grant
expected to occur on May 15, 2010, this amount will
increase to $145,000.
During each calendar year, non-employee directors may elect
between two payout schedules for any restricted stock units to
be awarded them on May 15 of the following year. Under the first
alternative, the restricted stock units have a restricted period
which ends on the first anniversary of the date of grant, but
the restricted period could end earlier if the directors
service on the Board were to end for a number of reasons other
than removal for cause. Under the second alternative, the
restricted stock units are generally paid out six months
following the date on which service as a director ends.
Non-employee directors can participate in the King
Pharmaceuticals, Inc. Non-Employee Directors Deferred
Compensation Plan, which allows them to defer receipt of some or
all fees paid for service as members of the Board of Directors,
thereby deferring the obligation to pay income taxes on these
amounts. Directors can elect to defer 0%, 25%, 50%, 75% or 100%
of their fees until termination of their service. Investment
choices consist of a money market fund and phantom stock units.
Each phantom stock unit equates to one share of King common
stock valued at the closing price on the NYSE on the last
trading day of the quarter. The money market fund replicates the
value of the Fidelity Retirement Money Market Fund. Deferral
elections must be made by the December 31st preceding
the year in which deferrals are to be made. For 2009,
Mr. Deavenport elected to defer 100% of his director fees.
No other directors elected to defer their fees.
46
OTHER
INFORMATION
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Human Resources Committee
during 2009 were Earnest W. Deavenport, Jr. (chair),
Gregory D. Jordan, Ted G. Wood and Elizabeth M. Greetham (who
was appointed to the Committee in June 2009). No current member
of the Committee nor any person who was a member of the
Committee during 2009 is a current or former officer or employee
of King. In addition, there are no relationships among our
executive officers, members of the Committee or entities whose
executives serve on the Board of Directors or the Committee that
require disclosure under applicable SEC regulations.
CORPORATE
GOVERNANCE
We are committed to effective corporate governance and believe
it is important to our long-term performance and ability to
create value for our shareholders. Our Board of Directors has
adopted Corporate Governance Guidelines which are available at
www.kingpharm.com by first choosing Investors
and then Governance.
Kings Corporate Governance Guidelines provide that
directors are expected to attend and participate in annual
meetings of shareholders, subject to unavoidable conflicts. All
directors attended the 2009 annual meeting of shareholders.
CODE OF
CONDUCT AND ETHICS
The Board of Directors has adopted a Corporate Code of Conduct
and Ethics which applies to all of our directors, officers and
employees. The Code appears on our website,
www.kingpharm.com. To the extent permitted by the SEC and
the NYSE regulations, we intend to disclose information as to
any amendments to the Code and any waivers from provisions of
the Code for our principal executive officer, principal
financial officer, and certain other officers by posting the
information on our website.
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review of
Related Person Transactions
Our Corporate Code of Conduct and Ethics provides that no
director, officer or employee of King shall permit his or her
decisions with respect to the company to be influenced by any
interest in, or personal relationship, personal contact or
agreement with, Kings suppliers, contractors, customers or
others doing business with King. Further, members of a
directors, officers or employees family are
prohibited from receiving compensation, commissions or gifts
from any company or organization that deals with King if such
receipt could reasonably be construed to influence the
directors, officers or employees decisions
with regard to Kings business. Actual or potential
conflict of interest transactions are required to be reported to
and reviewed by our Legal Department or our Compliance Office
before they take place. Any change or waiver of these standards
for a director or executive officer may be made only by the
Board of Directors (with any interested director abstaining) and
must be promptly disclosed as required by law or NYSE rules.
Further, for any transaction in which a director or officer of
King has a direct or indirect interest, King follows the
requirements of the Tennessee Business Corporation Act, which
requires that:
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the transaction must be fair to King,
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the material facts of the transaction and the directors or
officers interest must be disclosed or known to the Board
of Directors,
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the Board of Directors must authorize, approve, or ratify the
transaction, and
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if the transaction requires the approval of shareholders, the
material facts of the transaction and directors or
officers interest must be disclosed or known to the
shareholders entitled to vote, and the shareholders authorize,
approve, or ratify the transaction.
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47
In addition to being required to report potential conflict
transactions to the Legal Department or the Compliance Office
before they take place, directors and all executive officers
complete an annual questionnaire regarding their relationship
with King and with other entities and persons who have a
relationship with King, if any, whether for-profit businesses,
non-profit or charitable organizations, civic groups or other
entities or persons. These questionnaires are reviewed by the
Legal Department, which advises the Board about any significant
information reported.
Transactions
with Related Parties
We are not aware of any transactions between us and any of our
directors, executive officers, 5% shareholders or their family
members or other persons since January 1, 2009 that require
disclosure under Item 404 of
Regulation S-K
under the Exchange Act.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our executive officers and directors, as well as owners of 10%
or more of our common stock, are subject to the reporting
requirements of Section 16(a) of the Exchange Act.
Section 16(a) requires these persons to file with the SEC
reports of their holdings and transactions in our equity
securities. Based on our records and representations from these
persons, we believe that SEC beneficial ownership reporting
requirements for 2009 were met, except with respect to one
inadvertent late Form 4 filing each by
Messrs. Andrzejewski, Brouillette, Bruce, Carter, Elrod,
Markison and Squicciarino, as well as by former executive
officer James Green, related to shares withheld for the payment
of taxes as the result of the vesting of certain performance
share units.
48
KING
STOCK OWNERSHIP
The following table sets forth certain information regarding the
ownership of the common stock as of March 30, 2010 for
(i) each person who owns more than 5% of the common stock,
(ii) each director, nominee for director and executive
officer of King, and (iii) all executive officers and
directors of King as a group. Unless otherwise indicated below,
the address of each person listed in the following table is c/o
King Pharmaceuticals, Inc., 501 Fifth Street, Bristol, Tennessee
37620.
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Beneficial Ownership of
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Common Stock (1)
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Percentage
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Number of
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Outstanding
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Executive Officers, Directors and 5% Shareholders
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Shares
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Shares
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Brian A. Markison (2)
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1,285,242
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*
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Joseph Squicciarino (3)
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476,907
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*
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Stephen J. Andrzejewski (4)
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345,955
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*
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Frederick Brouillette, Jr. (5)
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245,062
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*
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Eric J. Bruce (6)
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254,281
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*
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Eric G. Carter (7)
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210,336
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*
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James W. Elrod (8)
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271,918
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*
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Kevin S. Crutchfield (9)
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0
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*
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Earnest W. Deavenport, Jr. (10)
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96,512
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*
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Elizabeth M. Greetham (11)
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37,698
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*
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Philip A. Incarnati (12)
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38,358
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*
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Gregory D. Jordan (13)
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81,679
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*
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R. Charles Moyer (14)
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76,345
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*
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D. Greg Rooker (15)
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134,895
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*
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Derace L. Schaffer (16)
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0
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*
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Ted G. Wood (17)
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86,254
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*
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All executive officers and directors as a group
(16 persons) (18)
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3,641,442
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1.5
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%
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FMR LLC (19)
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37,020,147
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14.8
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%
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Blackrock Inc. (20)
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20,935,720
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8.4
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%
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Wellington Management Company, LLP (21)
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20,103,289
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8.1
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%
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*
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Less than 1%.
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(1)
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Unless otherwise indicated,
beneficial ownership consists of sole voting and investing power
based on 249,609,987 shares issued and outstanding as of
March 30, 2010. Options to purchase shares which are
exercisable or become exercisable within 60 days of
March 30, 2010 and restricted stock units convertible into
common stock within 60 days of March 30, 2010 are
deemed to be outstanding for the purpose of computing the
percentage of outstanding shares owned by each person to whom a
portion of such options relate but are not deemed to be
outstanding for the purpose of computing the percentage owned by
any other person.
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(2)
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Includes 160,724 shares held
individually, 723,758 shares issuable upon the exercise of
options and 400,760 shares of restricted stock.
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(3)
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Includes 92,977 shares held
individually, 123,690 shares issuable upon the exercise of
options and 260,240 shares of restricted stock.
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(4)
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Includes 40,429 shares held
individually, 174,026 shares issuable upon the exercise of
options and 131,500 shares of restricted stock.
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(5)
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Includes 11,853 shares held
individually, 160,449 shares issuable upon the exercise of
options and 72,760 shares of restricted stock.
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(6)
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Includes 69,233 shares held
individually, 74,178 shares issuable upon the exercise of
options and 110,870 shares of restricted stock.
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(7)
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Includes 21,653 shares held
individually, 49,943 shares issuable upon the exercise of
options and 138,740 shares of restricted stock.
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(8)
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Includes 43,940 shares held
individually, 86,208 shares issuable upon the exercise of
options and 141,770 shares of restricted stock.
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(9)
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Does not include 3,174 restricted
stock units, which will vest on February 8, 2011.
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(10)
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Includes 27,821 shares held
individually, 53,333 shares issuable upon the exercise of
options and 15,358 restricted stock units convertible into
common stock within 60 days of March 30, 2010. Does
not include 50,881 shares of King phantom stock held
through the deferred compensation plan for non-employee
directors.
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(11)
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Includes 12,794 shares held
individually and 24,904 shares issuable upon the exercise
of options. Does not include 28,885 shares of restricted
stock units, the vesting of which will occur on a date six
months after Ms. Greethams departure from the board
of directors.
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(12)
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Includes 23,000 shares held
individually and 15,358 restricted stock units convertible into
common stock within 60 days of March 30, 2010.
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49
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(13)
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Includes 26,321 shares held
individually, 40,000 shares issuable upon the exercise of
options and 15,358 restricted stock units convertible into
common stock within 60 days of March 30, 2010.
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(14)
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Includes 7,654 shares held
individually, 53,333 shares issuable upon the exercise of
options and 15,358 restricted stock units convertible into
common stock within 60 days of March 30, 2010.
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(15)
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Includes 60,212 shares held
individually, 1,350 shares held by The Jason Foundation and
73,333 shares issuable upon the exercise of options. Does
not include 28,885 shares of restricted stock units, the
vesting of which will occur on a date six months after
Mr. Rookers departure from the board of directors.
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(16)
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Does not include 3,174 restricted
stock units, which will vest on February 8, 2011.
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(17)
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Includes 59,460 shares held
individually and 26,794 shares issuable upon the exercise
of options. Does not include 28,885 shares of restricted
stock units, the vesting of which will occur on a date six
months after Mr. Woods departure from the board of
directors.
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(18)
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Includes 1,663,949 shares
subject to options exercisable, and 61,432 restricted stock
units convertible into common stock, within 60 days of
March 30, 2010.
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(19)
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Based on Schedule 13G/A filed
with the SEC jointly by FMR LLC and Edward C. Johnson III. The
address of FMR LLC is 82 Devonshire Street, Boston,
Massachusetts 02109.
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(20)
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Based on Schedule 13G filed
with the SEC by Blackrock Inc. The address of Blackrock Inc. is
40 East
52nd
Street, New York, New York 10022.
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(21)
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Based on Schedule 13G filed with
the SEC by Wellington Management Company, LLP. The address of
Wellington Management Company, LLP is 75 State Street, Boston,
Massachusetts 02109.
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50
PROPOSALS
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors has nominated the following persons to
stand for election at the 2010 annual meeting of shareholders,
to serve until the 2011 annual meeting of shareholders, or until
the directors respective successors are elected and
qualified:
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Kevin S. Crutchfield
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Brian A. Markison
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Earnest W. Deavenport, Jr.
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R. Charles Moyer, Ph.D.
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Elizabeth M. Greetham
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D. Greg Rooker
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Philip A. Incarnati
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Derace L. Schaffer, M.D.
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Gregory D. Jordan, Ph.D.
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Ted G. Wood
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Information about the persons nominated for election as
directors is provided beginning on page 7.
Unless authority to vote for any of these nominees is withheld,
the shares represented by proxies will be voted FOR the election
of the persons listed above. In the event that any nominee
becomes unable or unwilling to serve, the shares represented by
the enclosed proxy will be voted for the election of such other
person as the Board of Directors may recommend in his or her
place. We have no reason to believe that any nominee will be
unable or unwilling to serve as a director.
Election
of directors requires the affirmative vote of the holders
of a plurality of the shares of common stock represented at the
annual meeting.
The Board of Directors recommends a vote FOR the election
of each of the persons listed above.
51
PROPOSAL 2
CHARTER AMENDMENT TO IMPLEMENT A MAJORITY VOTING STANDARD IN
UNCONTESTED ELECTIONS OF DIRECTORS AND EFFECT AN ADMINISTRATIVE
CHANGE
The Board of Directors recommends that Kings shareholders
approve an amendment to the companys Third Amended and
Restated Charter, which we refer to as our charter, to
(i) provide for majority voting in uncontested elections of
directors and (ii) delete language related to a classified
Board, which is no longer relevant following this meeting.
Majority
Voting
The Tennessee Business Corporation Act provides that, unless
otherwise specified in a companys charter, a director is
elected by a plurality of the votes cast in the election. Our
charter does not currently specify the voting standard required
in director elections and, therefore, Kings directors
currently are elected by a plurality vote. Under a plurality
voting standard for director elections, only votes
for the election of a director are counted, not any
withhold votes. As a result, in an uncontested
election (which occurs when the number of director nominees
equals the number of directors to be elected), a director could
be elected to our Board with only one for vote,
despite an overwhelming number of withhold votes.
Throughout the past year, as well as in prior years, the
Nominating and Corporate Governance Committee and the full Board
have carefully considered the arguments for and against a
majority voting standard. In particular, since our 2009 annual
meeting, the Nominating and Corporate Governance Committee has
studied the voting results for the non-binding shareholder
proposal presented at that meeting which requested that the
Board adopt a majority voting standard for director elections
and analyzed current corporate governance trends, including the
standards for voting in director elections in place at companies
similar in size to King, including those in the pharmaceutical
industry. The Nominating and Corporate Governance Committee also
carefully evaluated the appropriateness of a majority voting
standard for King in light of our overall corporate governance
structure. Following this review, the Nominating and Corporate
Governance Committee concluded that a majority voting standard
in uncontested elections of directors would be in Kings
and our shareholders best interests and recommended to the
Board that King adopt such a standard. The Board considered the
recommendation of the Nominating and Corporate Governance
Committee and the benefits of retaining a plurality voting
standard, including the greater certainty that the annual
election will result in a full and duly elected Board of
Directors. However, the Board recognizes that requiring
directors to be elected by a majority of the votes cast
(a) helps ensure that only directors with broad
acceptability among Kings voting shareholders will be
seated on the Board and (b) enhances the accountability of
each Board member to shareholders. On balance, the Board
concluded that a majority vote standard would be in Kings
and our shareholders best interests. Notably, the
difference in standards would not have had any impact on King in
the past, because its director nominees have always received
vote totals exceeding not only a majority of the votes cast, but
a majority of the shares outstanding.
The Board has authorized, and recommends that Kings
shareholders approve, an amendment to our charter specifying
that each director nominee in an uncontested election must be
elected by an affirmative vote of a majority of the total number
of votes cast for or against him or her.
Shareholders also will be entitled to abstain from
voting in the election of a director. Abstentions and broker
non-votes (which are described above under Information
About the Annual Meeting) will have no effect in
determining whether the required affirmative majority vote has
been obtained. In the case of a contested election, that is, an
election for which the number of nominees exceeds the number of
directors to be elected, directors will continue to be elected
by a plurality of the votes cast by holders of King common stock
entitled to vote in the election.
Under Tennessee law, a director continues in office until a
successor is elected and qualified, even if the director is not
reelected in an uncontested election. To address the potential
for such a holdover director, the proposed charter
amendment provides that an incumbent director who is not
reelected in an uncontested election must tender his or her
resignation to the Board. The Board, taking into account the
recommendation of the Nominating and Corporate Governance
Committee, will determine whether to accept the tendered
resignation. The Board will be required to act on the tendered
resignation and publicly disclose its decision and its rationale
within 90 days following the certification of election
results. The director who tenders his or her resignation will
not be permitted to participate in deliberations of or voting by
the Nominating and Corporate Governance Committee or the Board
regarding his or her resignation.
52
Administrative
Change
Our charter currently provides for a classified Board of
Directors until the 2010 annual meeting of shareholders. That
is, prior to this years annual meeting, our directors were
divided into three classes, with one-third of our directors
elected at each annual meeting. Our classified Board will be
eliminated as of this years annual meeting and, as a
result, beginning this year all of our directors will stand for
election at each annual meeting of shareholders. Because the
Board will no longer be classified as of this annual meeting of
shareholders, the language currently in our charter providing
for a classified Board is no longer necessary it
serves no other purpose. In order to streamline our charter, the
Board has authorized amending the charter to remove this
unnecessary language and recommends that Kings
shareholders also approve this administrative change.
Charter
Amendment
Shareholders holding at least eighty percent (80%) of the
outstanding shares of common stock entitled to be voted on the
matter must vote for this proposal in order for the
charter amendments described above to be approved. If this
proposal is approved by shareholders, Section 6 of the
charter will be amended and restated to read as follows:
6. Board of Directors.
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(a)
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The number of directors shall be as specified in the Amended and
Restated Bylaws of the Corporation. All directors shall be
elected at each annual meeting of shareholders for terms
expiring at the next annual meeting of shareholders. Each
director shall hold office for the term for which the director
is elected or appointed and until the directors successor
shall be elected and qualified, subject, however, to prior
death, resignation, retirement, disqualification or removal from
office with or without cause. In no case shall a decrease in the
number of directors shorten the term of any incumbent director.
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(b)
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Except in the case of a contested election, a nominee for
director shall be elected by affirmative vote of a majority of
the votes cast in favor of or against the election of such
nominee by holders of shares entitled to vote in the election at
a meeting for the election of directors at which a quorum is
present. For purposes of this paragraph, affirmative vote
of a majority of the votes cast shall mean that the number
of votes cast in favor of the election of such nominee exceeds
the number of votes cast against the election of such nominee;
abstentions and broker non-votes shall not be deemed to be votes
cast for purposes of tabulating the vote. In any uncontested
election of directors, any nominee who is an incumbent director
and who receives a greater number of votes cast against his or
her election than in favor of his or her election promptly shall
tender his or her resignation to the Board of Directors. The
Board of Directors (excluding the director who tendered his or
her resignation) shall decide, taking into account the
recommendation of the Nominating and Corporate Governance
Committee, whether to accept or reject the tendered resignation,
or whether other action should be taken, and shall publicly
disclose its decision and the rationale therefor within
90 days from the date of the certification of the election
results. In a contested election, a nominee for director shall
be elected by a plurality of the votes cast by holders of shares
entitled to vote in the election at a meeting for the election
of directors at which a quorum is present. An election shall be
considered contested if there are more nominees for
election than positions on the Board of Directors to be filled
by election at the meeting. The determination of the number of
nominees for purposes of this subsection shall be made as of
(i) the expiration of the time fixed by this Third Amended
and Restated Charter or the Amended and Restated Bylaws of the
Corporation for advance notice by a shareholder of an intention
to nominate directors, or (ii) absent such a provision, at
a time publicly announced by the Board of Directors which is not
more than 14 days before notice is given of the meeting at
which the election is to occur.
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If approved, this charter amendment will become effective upon
the filing of articles of amendment with the Tennessee Secretary
of State. King would make such a filing promptly after the
annual meeting. Additionally, upon approval of this proposal,
the Board will amend Kings bylaws and the Nominating and
Corporate Governance Committee charter to reflect the majority
voting amendment described above. These amendments do not
require shareholder approval.
53
The
proposed amendment of the charter requires the affirmative vote
of the holders
of at least 80% of the outstanding shares of common stock.
Our Board of Directors unanimously recommends a vote FOR the
proposal
to amend the charter to provide for majority voting
in uncontested elections of directors
and to effect the administrative change described
above.
54
PROPOSAL 3
REAPPROVAL OF PERFORMANCE GOALS WITHIN OUR INCENTIVE
PLAN
The Board of Directors recommends that Kings shareholders
reapprove the performance goals included in the King
Pharmaceuticals, Inc. Incentive Plan (the Incentive
Plan). The goals listed in the Incentive Plan are used to
establish the objective performance targets applicable to grants
of performance-based awards under the Incentive Plan. As
described in more detail below, these goals are designed to
enable King to provide certain forms of performance-based
compensation to our executive officers that will meet the
requirements for tax deductibility under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the
Code). The performance goals to be reapproved are
described below under Summary of the Incentive
Plan Performance Goals.
Section 162(m) of the Code generally disallows a tax
deduction to public companies for compensation in excess of
$1 million paid to any individual who, on the last day of
the taxable year, is either the chief executive officer or one
of the three other most highly compensated officers of the
company other than the chief financial officer (a Covered
Employee). However, the deduction limit does not apply to
performance-based compensation, as defined in
Section 162(m) of the Code.
For awards granted under the Incentive Plan to qualify as
performance-based compensation, our shareholders must approve
the material terms under which the awards will be paid,
including (i) the class of employees eligible to receive
awards, (ii) a description of the business criteria upon
which the performance goals can be based, and (iii) the
maximum amount of compensation that could be paid to any
employee or the formula used to calculate the amount of
compensation to be paid to any employee if the performance goals
are attained. Our shareholders approved each of these terms at
the 2005 annual meeting of shareholders when we first
established the Incentive Plan.
If we wish to continue to treat the long-term performance units,
performance shares, annual incentive awards and certain stock
options and stock appreciation rights granted under the
Incentive Plan as qualified performance-based compensation under
Section 162(m) of the Code, the performance goals must be
approved by the shareholders every five years. This approval is
necessary because the Incentive Plan grants the Compensation and
Human Resources Committee of our Board (the Compensation
Committee), which administers the Incentive Plan, the
discretion to set the performance goals for any award using one
or more of the performance criteria set forth in the Incentive
Plan. Because the class of eligible employees and the annual
per-participant limits on grants are not being modified from
those approved by shareholders in 2005, shareholder approval is
not currently required for these terms.
Our shareholders are being asked to approve the performance
goals so that awards under the Incentive Plan that are subject
to the attainment of performance criteria can be exempt from the
$1 million limit on deductible compensation under
Section 162(m) of the Code.
Summary
of the Incentive Plan
The following is a summary of the principal features of the
Incentive Plan. The summary is not a complete description of all
the provisions of the Incentive Plan, and is qualified in its
entirety by the specific language of the Incentive Plan, which
is attached to this proxy statement as Appendix A. The
Board of Directors encourages you to review the complete
Incentive Plan.
Administration
The Board of Directors designates the committee that administers
the Incentive Plan (the Committee). Currently, the
Incentive Plan is administered by the Compensation Committee.
The Committee at all times must consist of three or more
members, each of whom is a non-employee director
within the meaning of
Rule 16b-3
of the Exchange Act, an outside director within the
meaning of Section 162(m) of the Code and an
independent director under Section 303A of the
NYSE Listed Company Manual.
The Committee has full authority to interpret and administer the
Incentive Plan in order to carry out its provisions and
purposes, including to:
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determine the participants under the Incentive Plan.
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55
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establish the terms and conditions of any annual incentive
award, long-term performance unit, stock option
(Option), stock appreciation right
(SAR), restricted stock unit (Restricted
Unit), restricted stock, or performance share, including
associated dividend equivalent rights (Dividend
Equivalents) (each an Award).
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delegate, subject to such terms, conditions, or guidelines as it
shall determine, to any employee or group of employees any
portion of its authority and powers with respect to Awards,
except that only the Committee or the Board of Directors can
exercise authority with respect to Awards granted to officers of
King or a subsidiary who are subject to the reporting
requirements under Section 16(a) of the Exchange Act
(Executive Officers).
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make any rules, determinations or modifications to the Incentive
Plan it deems advisable with respect to participants based
outside the United States and newly eligible participants.
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condition the grant of any Award on the participants entry
into a written agreement containing covenants not to compete,
not to solicit Kings employees and customers, and not to
disclose confidential information.
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Eligibility
Awards can be made to any individual who is either an employee
(including an officer) or non-employee director of King or any
of its subsidiaries. As of April 15, 2010, there are
approximately 2,600 employees (including seven executive
officers) and nine non-employee directors of King and its
subsidiaries who are eligible to participate under the Incentive
Plan.
Types of
Awards
The Incentive Plan provides for grants of incentive stock
options qualifying for special tax treatment under
Section 422 of the Code (ISOs), nonstatutory
stock options (Nonstatutory Options), SARs,
restricted stock, Restricted Units, Dividend Equivalents,
long-term performance units, performance shares and annual
incentive awards. Awards can be granted singly, in combination
or in tandem, pursuant to which common stock, cash or other
property can be delivered to the Award recipient. Awards can
also include awards of common stock or Restricted Units
(including any associated Dividend Equivalents) made in
conjunction with other incentive programs established by King or
its subsidiaries.
Performance
Goals
The Committee is responsible for establishing the performance
goals upon which any performance-based Awards are contingent
under the Incentive Plan. The Incentive Plan requires the
Committee to use one or more of the following criteria to
establish the performance goals for Awards that are intended to
constitute performance-based compensation under
Section 162(m) of the Code:
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earnings per share;
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total shareholder return;
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operating income;
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net income;
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cash flow;
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gross profit;
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|
gross profit return on investment;
|
|
|
|
return on equity;
|
|
|
|
return on capital;
|
|
|
|
sales;
|
|
|
|
revenue;
|
56
|
|
|
|
|
gross margin; and
|
|
|
|
gross margin return on investment.
|
Shares Subject
to the Incentive Plan; Other Limitations of Awards
The maximum number of shares of common stock issuable under the
Incentive Plan is 30 million. To the extent that any shares
of common stock subject to an Award, or any award under the 1997
Incentive and Nonqualified Stock Option Plan for Employees of
King or the 1998 Non-Employee Director Stock Option Plan made
prior to the effective date of the Incentive Plan, are not
issued because it expires without having been exercised, is
cancelled, repurchased by King, terminated, forfeited or is
settled without issuance of common stock (including, but not
limited to, shares tendered to exercise outstanding Options,
shares tendered or withheld for taxes on Awards or shares issued
in connection with a restricted stock or Restricted Unit Award
that are subsequently forfeited), such shares will be available
again for grants of Awards under the Incentive Plan. The shares
to be delivered under the Incentive Plan can consist, in whole
or in part, of common stock purchased by King for the purpose of
such Awards, treasury common stock or authorized but unissued
common stock not reserved for any other purpose.
During any three calendar-year period, no individual can receive
under the Incentive Plan (i) Options
and/or SARs
covering more than an aggregate of nine million shares or
(ii) restricted stock, Restricted Units, performance shares
or other stock-based Awards established by the Committee (other
than an Option or a SAR) representing more than an aggregate of
three million shares. The maximum amount of annual incentive
awards that can be paid or made available to participants cannot
exceed $3,750,000 in any year per participant.
Stock
Options
Options entitle the recipient to purchase shares of common stock
at the exercise price specified by the Committee in the
recipients Option agreement. The Incentive Plan permits
the grant of both ISOs and Nonstatutory Options. The Committee
will generally determine the terms and conditions of all Options
granted. However, Options must be granted with an exercise price
at least equal to the fair market value of a share of common
stock on the date of grant, cannot be exercisable for more than
10 years after the date of grant and no Option that is
intended to be an ISO can be granted after the tenth anniversary
of the date the Incentive Plan was approved by the Board of
Directors. Options generally become exercisable in one-third
increments on each of the first three anniversaries of the date
of grant. However, the Committee can establish performance goals
for the exercisability of any Option. For purposes of the
Incentive Plan, fair market value generally means,
on any given date, the price of the last trade, regular way, of
Kings common stock on such date on the NYSE (or if not
listed on the NYSE, on such other recognized quotation system on
which trading prices of the common stock are then quoted). If
there are no trades on the relevant date, the fair market
value for that date means the closing price on the
immediately preceding date on which common stock transactions
were reported. If the NYSE or other applicable exchange adopts a
trading policy permitting trades after 4:00 p.m. Eastern
Standard Time, fair market value will mean the last
trade, regular way, reported on or before 4:00 p.m. Eastern
Standard Time (or such earlier or later time as the Committee
establishes from time to time). On
April , 2010, the fair market value
of our common stock determined on this basis was
$ . per share.
The Committee does not have the authority to reduce the exercise
price of any outstanding Option or to grant any new Options in
substitution for or upon the cancellation of Options previously
granted, except as described below under Summary of the
Incentive Plan Adjustment in Capitalization.
Stock
Appreciation Rights
A SAR is a contractual right granted to the participant to
receive, either in cash or common stock, an amount equal to the
excess, if any, of the fair market value on the date the SAR is
exercised over the fair market value on the date the SAR was
granted. SARs can be granted as freestanding Awards or in tandem
with an Option. A SAR can be granted with associated Dividend
Equivalents. Unless the Committee otherwise determines, the
terms and conditions applicable to SARs granted in tandem with
Options will be substantially identical to the terms and
conditions applicable to the tandem Options, and the terms and
conditions applicable to freestanding SARs will be substantially
identical to the terms and conditions that would have been
applicable were the grant of the SARs a grant of Options. SARs
that are granted in tandem with an Option can only be exercised
upon surrender of the right to exercise such Option for an
equivalent number of
57
shares. The Committee can establish a maximum amount per share
which will be payable in cash upon the exercise of a SAR.
Restricted
Stock, Restricted Stock Units and Dividend Equivalents
The Incentive Plan provides for the grant of shares of
restricted stock, Restricted Units and Dividend Equivalents,
which are converted to shares of unrestricted common stock upon
the lapse of restrictions.
A share of restricted stock is a share of common stock that is
subject to certain forfeiture and transfer restrictions for a
period of time as specified by the Committee in the
recipients Award agreement.
A Restricted Unit is an unfunded, unsecured right, subject to
certain forfeiture and transfer restrictions, to receive a share
of common stock or cash at the end of a period of time as
specified by the Committee in the recipients Award
agreement.
A Dividend Equivalent represents an unfunded, unsecured right to
receive in common stock or cash an amount equal to all or any
portion of the regular cash dividends that would be paid on a
specified number of shares of common stock if such shares were
owned by the Award recipient. Dividend Equivalents can be
granted in connection with a grant of Restricted Units, Options
and/or SARs.
Unless otherwise determined by the Committee at the time of
grant, the restrictions on shares of restricted stock and
Restricted Units will generally lapse on the third anniversary
of the date of grant. The Committee can provide for accelerated
vesting based on attaining performance goals specified by the
Committee.
Generally, a participant will have all the rights of a
shareholder with respect to shares of restricted stock,
including but not limited to, the right to vote and the right to
receive dividends. However, the Committee can place restrictions
and conditions on such rights. A participant will not have the
rights of a shareholder with respect to Restricted Units or
Dividend Equivalents.
Annual
Incentive Awards
The Committee can grant Awards with a performance cycle of one
year or less based on the achievement of specified performance
goals. Such Awards shall be paid in cash unless otherwise
specified by the Committee.
Long-Term
Performance Units
The Committee can grant long-term performance units, to be paid
in cash
and/or
common stock. Performance cycles are generally at least one year
and performance can be measured by objective criteria other than
the appreciation or depreciation of common stock value. In any
one-year period, an individual participant cannot be awarded
long-term performance unit awards exceeding $5,000,000.
Performance
Share Awards
The Committee can grant performance share awards, which are
units denominated in common stock. The number of such units is
determined over the performance period based on the satisfaction
of performance goals relating to the common stock price.
Performance share awards are payable in common stock.
Treatment
of Awards on Termination of Employment
Unless the Committee otherwise determines, Awards generally are
treated as follows upon a participants termination of
employment.
Resignation. If a participant voluntarily
terminates employment:
|
|
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|
|
Options/SARs (including associated Dividend Equivalents): All
outstanding Options, SARs and associated Dividend Equivalents
that are exercisable on the date of termination can be exercised
at any time prior to the earlier of the expiration date of the
term of the Options
and/or SARs
or the 90th day following termination of employment;
|
58
|
|
|
|
|
Restricted Stock/Restricted Units (including associated Dividend
Equivalents): All restricted stock, Restricted Units and
associated Dividend Equivalents credited to such participant are
forfeited;
|
|
|
|
Annual Incentive Awards: If such termination occurs before
authorization of the payment of an annual incentive award, the
participant forfeits all rights to such amounts; and
|
|
|
|
Long-Term Performance Unit Awards/Performance Share Awards: All
long-term performance unit awards and performance share awards
credited to such participant are forfeited.
|
Termination for Cause. If a participants
employment is terminated for cause:
|
|
|
|
|
Options/SARs (including associated Dividend Equivalents):
Outstanding Options, SARs and associated Dividend Equivalents
are forfeited at the time of such termination, and the Committee
can require that the participant disgorge any profit, gain or
benefit from any Award exercised up to 12 months prior to
the participants termination;
|
|
|
|
Restricted Stock/Restricted Units (including associated Dividend
Equivalents): All restricted stock, Restricted Units, and
associated Dividend Equivalents are forfeited at the time of
such termination, and the Committee can require that the
participant disgorge any profit, gain or benefit from any Award
for which the restrictions lapsed in the 12 months prior to
the participants termination;
|
|
|
|
Annual Incentive Awards: All rights to an annual incentive award
are forfeited; and
|
|
|
|
Long-Term Performance Unit Awards/Performance Share Awards: Any
outstanding long-term performance units or performance share
awards are forfeited and the Committee can require that the
participant disgorge any profit, gain or benefit from any Award
paid to such participant up to 12 months prior to the
participants termination.
|
For purposes of the Incentive Plan, cause means
dishonesty, fraud or misrepresentation; inability to obtain or
retain appropriate licenses; violation of any rule or regulation
of any regulatory or self-regulatory agency or of any policies
of King or a subsidiary; commission of a crime; breach of a
written covenant or agreement not to misuse King property or
information; or any act or omission detrimental to the conduct
of Kings business in any way.
The determination of whether a termination is for cause is made
by the Committee in its sole discretion or as delegated by the
Committee to King management.
Approved Retirement. If a participants
employment terminates by reason of Approved
Retirement:
|
|
|
|
|
Options/SARs (including associated Dividend Equivalents): All
outstanding Options, SARs and associated Dividend Equivalents
that are exercisable on the date of such termination continue to
vest and can be exercised at any time prior to the expiration
date of the term of the Options;
|
|
|
|
Restricted Stock/Restricted Units (including associated Dividend
Equivalents): Any restrictions will lapse as to outstanding
shares of restricted stock and Restricted Units and any
associated Dividend Equivalents will be paid to the participant;
|
|
|
|
Annual Incentive Awards: The participant will receive a prorated
annual incentive award based on actual achievement of the
performance goals for such performance cycle; and
|
|
|
|
Long-Term Performance Unit Awards: If the participant is an
executive officer, as defined in
Rule 3b-7
of the Exchange Act, the participant will receive a prorated
payment of any long-term performance unit awards based on actual
achievement of the performance goals for the performance cycle.
Otherwise, the participant will receive a prorated payment of
any long-term performance unit awards and performance share
awards calculated as if the target performance for each
long-term performance unit had been achieved.
|
|
|
|
Performance Share Awards: The participant will receive a
prorated payment of any performance share awards based on actual
achievement of the performance goals for the performance cycle.
|
For purposes of the Incentive Plan, Approved
Retirement generally means any voluntary termination
(other than for cause) of the participants
employment after having reached 55 years of age and after
having completed at least 15 years of continuous employment
with King.
59
Death or Disability. If a participants
employment or service is terminated due to death or disability:
|
|
|
|
|
Options/SARs (including associated Dividend Equivalents): All
outstanding Options, SARs and associated Dividend Equivalents
granted to the participant immediately vest and become
exercisable. Such Awards can be exercised by the
participants estate or representative within two years, in
the event of death, and one year, in the event of disability,
but in no event later than the expiration of the term of the
Option or SAR;
|
|
|
|
Restricted Stock/Restricted Units (including associated Dividend
Equivalents): Any restrictions will lapse as to outstanding
shares of restricted stock and Restricted Units and any
associated Dividend Equivalents will be paid to the participant;
|
|
|
|
Annual Incentive Awards: The participants estate or
representative will receive a prorated annual incentive award
based on full achievement of the performance goals for such
performance cycle; and
|
|
|
|
Long-Term Performance Unit Awards/Performance Share Awards: The
participant will receive a prorated payment of the
participants long-term performance unit awards and
performance share awards calculated based on full achievement of
the performance goals for the performance cycle.
|
Qualifying Separation. For information about
the effect of Kings Severance Plan on Awards made under
the Incentive Plan in connection with a Qualifying
Separation, please see the section entitled
Post-Termination Payments beginning on page 35.
Termination for Other Reason. If a
participants employment terminates for any reason other
than resignation, termination for cause, approved retirement,
death, disability, or a qualifying separation, outstanding
Awards are treated in the same manner as in the case of a
resignation.
Non-Transferability
of Awards
Generally, no Awards granted under the Incentive Plan can be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. The Committee can, in the Award agreement or
otherwise, permit transfers of Nonstatutory Options (with or
without tandem SARs), freestanding SARs, restricted stock and
Restricted Units to certain family members.
Adjustment
in Capitalization
In the event of any stock dividend, stock split or share
combination, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation,
split-up,
spin-off, combination, dissolution, liquidation, share exchange,
warrants or rights offering to purchase common stock at a price
substantially below fair market value or other similar event
affecting our common stock, the Committee shall adjust
appropriately (a) the aggregate number of shares of common
stock available for Awards, (b) the aggregate limitations
on the number of shares that can be awarded as a particular type
of Award or that can be awarded to any particular participant in
any particular period, and (c) the aggregate number of
shares subject to outstanding Awards and the exercise prices or
base prices applicable to outstanding Awards.
Change of
Control
In the event of a change of control of King:
|
|
|
|
|
Each Option and SAR then outstanding will become fully
exercisable regardless of the vesting schedule otherwise
applicable to such Option
and/or SAR;
|
|
|
|
The restricted period will lapse as to each share of restricted
stock and each Restricted Unit then outstanding;
|
|
|
|
Notwithstanding the foregoing, the Committee can, in its
discretion, provide that each Option, SAR, share of restricted
stock and/or
Restricted Unit will be cancelled in exchange for an payment per
share or unit in an amount based on the change of control
price; and
|
|
|
|
Any outstanding long-term performance unit awards or performance
share awards which have been earned but not paid will become
immediately payable. Any outstanding long-term performance unit
awards or performance share awards for in-progress performance
cycles will end and all participants will be deemed to have
earned an award
|
60
|
|
|
|
|
equal to the participants target award opportunity for the
performance cycle. King will pay all such Awards as a settlement
payment within 30 days of such change of control, based on
the change of control price.
|
The change of control price is the highest price per share of
common stock paid in conjunction with any transaction resulting
in a change of control or, in the case of a change of control
occurring solely by reason of a change in the composition of the
Board of Directors, the highest fair market value of the common
stock on any of the 30 trading days immediately preceding the
date on which the change of control occurs.
However, notwithstanding the foregoing, no cancellation,
acceleration of exercisability, vesting, cash settlement or
other payment will occur with respect to any Option, SAR, share
of restricted stock, Restricted Unit, long-term performance unit
and/or
performance share if the Committee reasonably determines in good
faith prior to the occurrence of a change of control that such
Award will be honored or assumed, or new rights substituted
therefor, by a participants employer (or the parent or
affiliate of such employer) immediately following the change of
control, subject to certain qualifications set forth in the
Incentive Plan.
For purposes of the Incentive Plan, a change of
control means: (i) the acquisition by any person
(within the meaning of Section 3(a)(9) of the Exchange Act)
of Kings capital stock which, when added to any existing
ownership held by such person as of the effective date of the
Incentive Plan, constitutes more than 50% of the total fair
market value or voting power of the then outstanding shares of
Kings capital stock or the total voting power of
Kings capital stock; (ii) the acquisition, within a
12-month
period ending on the date of the most recent acquisition, of not
less than 35% of the total voting power of Kings capital
stock; (iii) a majority of the members of Kings Board
of Directors being replaced in any
12-month
period by directors whose appointment or election is not
endorsed by a majority of the directors prior to the date of the
appointment or election; or (iv) a change in the ownership
of a substantial portion of Kings assets, which will be
deemed to occur on the date that any person acquires, or has
acquired within the prior
12-month
period ending on the date of the most recent acquisition by such
person, assets of King which have a total gross fair market
value of not less than 40% of the total gross fair market value
of all of Kings assets immediately prior to such
acquisition(s). The acquisition by a person who owns more than
50% of the total fair market value or the total voting power of
Kings capital stock will not constitute a change of
control for purposes of the Incentive Plan.
Term and
Amendment
Unless earlier terminated in accordance with its terms, the
Incentive Plan will remain in effect until May 31, 2015.
The Board of Directors can, at any time amend, modify, suspend
or terminate the Incentive Plan, in whole or in part, without
notice to or the consent of any participant or employee;
however, any amendment that would (i) increase the number
of shares available for issuance under the Incentive Plan,
(ii) lower the minimum exercise price for an Option or the
base price at which a SAR can be granted, or (iii) change
the individual Award limits, must be approved by Kings
shareholders. No amendment, modification or termination of the
Incentive Plan can in any manner adversely affect any Award
previously granted under the Incentive Plan, without the consent
of the participant.
No
Limitation on Compensation; Scope of Liabilities
Nothing in the Incentive Plan limits our right to establish
other plans if and to the extent permitted by applicable law.
Kings liability under the Incentive Plan is limited to the
obligations expressly set forth in the Incentive Plan.
U.S.
Federal Tax Implications for Awards
The following is a brief description of the U.S. federal
income tax consequences generally arising with respect to the
grant of Awards under the Incentive Plan.
Stock Options
The grant of an Option will create no tax consequences for the
recipient or King. The grant of an associated Dividend
Equivalent will not result in taxable income to the participant
unless and until actual cash payments are made to such
participant from such Award.
61
Upon exercising an ISO, a recipient will not recognize taxable
income; however, the alternative minimum tax might apply. Upon
exercising a Nonstatutory Option, the recipient will recognize
ordinary income equal to the excess of the fair market value on
the date of exercise over the exercise price.
The disposition of shares acquired through the exercise of an
ISO before one year after the date of exercise and two years
after the date of grant is called a disqualifying
disposition. A disqualifying disposition will generally
cause the recipient to (i) recognize ordinary income equal
to the excess of the fair market value on the date of exercise
over the exercise price, and (ii) be taxed at the capital
gain rate for any appreciation of the shares after the date of
exercise. A recipients disposition of shares acquired upon
the exercise of an ISO which is not a disqualifying disposition
(i.e., for which the one-year and two-year holding
periods have been met) will cause the recipient to be taxed at
the long-term capital gain rate on the excess of the fair market
value on the date of disposition over the exercise price. A
recipients disposition of shares acquired upon the
exercise of a Nonstatutory Option will cause the recipient to be
taxed at either the short-term or long-term capital gain rate on
any appreciation in the shares after the date of exercise.
King will generally be entitled to a tax deduction equal to the
amount recognized as ordinary income by the recipient in
connection with the exercise of a Nonstatutory Option. King will
not be entitled to a tax deduction with respect to any amount
that represents a capital gain to a recipient. In addition, any
deduction for an Award to a Covered Employee of compensation
exceeding $1 million is conditioned on the Award qualifying
as performance-based compensation under Section 162(m) of
the Code.
SARs
The grant of a SAR will create no tax consequences for the
recipient or for King. The grant of an associated Dividend
Equivalent will not result in taxable income to the recipient
until actual cash payments are made from the Award. Upon
exercising a SAR, the recipient will recognize ordinary income
equal to the excess of the fair market value on the date of
exercise over the exercise price. Any subsequent appreciation of
SARs settled in shares of common stock will be taxed at the
short-term or long-term capital gain rate.
King will be entitled to a tax deduction equal to the amount
recognized as ordinary income by the recipient at the time the
SAR is exercised. Any deduction for an Award to a Covered
Employee of compensation exceeding $1 million is
conditioned on the Award qualifying as performance-based
compensation under Section 162(m) of the Code.
Performance Shares, Long-Term Performance Units, and
Restricted Units
The recipient of performance shares, long-term performance
units, and Restricted Units will recognize ordinary income equal
to the fair market value of the shares at the time the shares
are received (or at the time the payment is received, in the
case of awards paid in cash). Any appreciation of shares after
receipt will be taxed at the short-term or long-term capital
gain rate at the time of disposition.
King will be entitled to a deduction equal to the fair market
value of the shares or payments on the date the shares
and/or cash
payments are made to recipients. Any deduction for an Award to a
Covered Employee of compensation exceeding $1 million is
conditioned on the Award qualifying as performance-based
compensation under Section 162(m) of the Code.
Restricted Stock
A recipient of restricted stock will generally recognize
ordinary income equal to the fair market value of the shares at
the time the restrictions lapse and will be taxed at the
short-term or long-term capital gain rate on any subsequent
appreciation at the time of disposition. However, a recipient
can elect to recognize ordinary income equal to the fair market
value of the shares at the time the restricted shares are
granted (a Section 83(b) Election) In this
case, the recipient would be taxed at the short-term or
long-term capital gain rate on any appreciation after grant at
the time of disposition.
King will be entitled to a tax deduction equal to the fair
market value of the shares on the date the restrictions lapse,
if the recipient does not make a Section 83(b) Election or
to a tax deduction equal to the fair market value of the shares
on the date of grant, if the recipient does make a
Section 83(b) Election. Any deduction for an Award to a
Covered Employee of compensation exceeding $1 million is
conditioned on the Award qualifying as performance-based
compensation under Section 162(m) of the Code.
62
Annual Incentive Awards
A recipient of an annual incentive award will generally
recognize ordinary income at the time payment is received.
King will be entitled to a tax deduction equal to the amount of
the annual incentive award at the time the award is paid. Any
deduction for an Award to a Covered Employee of compensation
exceeding $1 million is conditioned on the Award qualifying
as performance-based compensation under Section 162(m) of
the Code.
Other
Information
Any future awards granted to eligible participants under the
Incentive Plan are subject to the discretion of the Committee
and, therefore, are not determinable at this time. However,
please refer to the Summary Compensation Table and the 2009
Grants of Plan Based Awards sections of this proxy statement,
which set forth information regarding the awards made to named
executive officers in the last fiscal year.
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
(a)
|
|
|
|
|
|
Remaining
|
|
|
|
Number of
|
|
|
|
|
|
Available for Future
|
|
|
|
Securities to be
|
|
|
(b)
|
|
|
Issuance Under
|
|
|
|
Issued Upon
|
|
|
Weighted-Average
|
|
|
Equity
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Compensation
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Plans (Excluding
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Securities Reflected
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
in Column (a))
|
|
|
Equity compensation plans approved by security holders
|
|
|
6,931,517
|
|
|
$
|
13.04
|
|
|
|
16,052,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,931,517
|
|
|
$
|
13.04
|
|
|
|
16,052,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
affirmative votes of the shares of common stock present
or represented by proxy at the meeting must exceed the opposing
votes
in order to reapprove the performance goals under the Incentive
Plan.
The Board of Directors recommends a vote FOR the proposal
to reapprove the performance goals under the Incentive
Plan.
63
PROPOSAL 4
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit Committee has appointed PricewaterhouseCoopers LLP, an
independent registered public accounting firm, to audit our
financial statements for the fiscal year ending
December 31, 2010. The Board proposes that the shareholders
ratify this appointment.
PricewaterhouseCoopers LLP audited our financial statements for
the fiscal year ended December 31, 2009. We expect that
representatives of PricewaterhouseCoopers LLP will be present at
the meeting, will be able to make a statement if they so desire,
and will be available to respond to appropriate questions.
The following table presents fees for professional audit
services rendered by PricewaterhouseCoopers LLP for the audit of
the companys annual financial statements for the years
ended December 31, 2009 and 2008, and fees billed for other
services rendered by PricewaterhouseCoopers LLP during those
periods.
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Audit fees (1)
|
|
$
|
2,286,873
|
|
|
$
|
2,329,857
|
|
Audit related fees (2)
|
|
|
26,775
|
|
|
|
576,150
|
|
Tax fees (3)
|
|
|
562,826
|
|
|
|
248,670
|
|
All other fees (4)
|
|
|
1,106,014
|
|
|
|
1,212,867
|
|
|
|
|
|
|
|
|
|
|
Total
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|
$
|
3,982,488
|
|
|
$
|
4,367,544
|
|
|
|
|
|
|
|
|
|
|
|
|
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(1)
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Audit fees relate to work performed
for the audit of financial statements or to services that are
normally provided by the independent registered public
accounting firm in connection with statutory and regulatory
filings or in connection with its audit engagement.
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|
(2)
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Audit related fees consisted
principally of: assurance and related services that are
reasonably related to the performance of the audit or review of
financial statements; including employee benefit plan audits;
due diligence assistance services in connection with Kings
acquisition of Alpharma Inc.; and special procedures required to
meet certain regulatory requirements.
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(3)
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Fees for professional services
rendered by the independent registered public accounting firm
for tax compliance, tax advice, and tax planning.
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(4)
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All other fees in 2009 and 2008
consisted of: subscriptions to services; fees associated with
service as Independent Review Organization in connection with
the requirements of the Corporate Integrity Agreement between
King and the Office of Inspector General of the United States
Department of Health and Human Services; and fees associated
with integration assistance services in connection with
Kings acquisition of Alpharma Inc.
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Policy on
Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting
Firm
Consistent with SEC policies regarding auditor independence, the
Audit Committee has responsibility for retaining, compensating,
terminating and overseeing the work of our independent
registered public accounting firm, and for pre-approving audit,
audit-related and permitted non-audit services rendered by that
firm. In recognition of this responsibility, the Audit Committee
has established a policy to pre-approve all audit and
permissible non-audit services provided by the independent
registered public accounting firm.
Before the company or any of its subsidiaries engages the
independent registered public accounting firm to render a
service, the engagement must be either specifically approved by
the Audit Committee or entered into pursuant to the Audit
Committees pre-approval policy. Unless a type of service
has received general pre-approval, it requires specific
pre-approval by the Audit Committee. Each year, the Audit
Committee reviews, and updates as necessary, a policy defining
all Audit, Audit-related, Tax and All Other services that have
the general or specific pre-approval of the Audit Committee. The
Audit Committee specifically pre-approves the terms of audit
services engagements, including quarterly reviews and
Section 404 attestation services and approves, if
necessary, any changes in terms, conditions and fees resulting
from changes in audit scope, company structure or other matters,
from one year to the next. As regards the other kinds of
services, while the Audit Committee believes that the
independent registered public accounting firm can provide
services such as assurance and related services, tax compliance
and planning, and other permissible non-audit services that are
routine and recurring without impairing the auditors
independence, the Audit Committee carefully scrutinizes the
scope of each proposed type of service prior to granting either
general or specific pre-approval. In particular, the Audit
Committee considers the amount or range of estimated fees as a
factor in determining whether a proposed service would impair
the auditors independence. When the Audit Committee has
approved an estimated fee for a service, the pre-approval
applies to all services described in the approval. Any proposed
services exceeding these levels require specific pre-approval by
the Audit Committee. Requests to provide services that require
specific approval by the Audit Committee
64
must be submitted jointly to the Audit Committee by the
independent registered public accounting firm and the Chief
Financial Officer, and must include a joint statement as to
whether, in their view, the request or application is consistent
with the SECs and the Public Company Accounting Oversight
Boards rules on auditor independence. In 2009 and 2008 the
Audit Committee approved all services provided by
PricewaterhouseCoopers LLP, the fees for which are reflected in
the table above.
In the event the shareholders do not ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public
accounting firm, the Audit Committee will reconsider its
appointment.
The
affirmative votes of the shares of common stock present
or represented by proxy at the meeting must exceed the opposing
votes
in order to ratify the appointment of the independent registered
public accounting firm.
The Board of Directors recommends a vote FOR ratification of the
appointment
of PricewaterhouseCoopers LLP as our independent registered
public accounting firm.
65
PROPOSAL 5
ADOPT SIMPLE MAJORITY VOTE
William Steiner, 112 Abbottsford Gate, Piedmont, NY 10968, the
owner of 6,000 shares of Kings common stock, acting
through John Chevedden as his proxy, has given notice that he or
a representative intends to present for action at the annual
meeting the following proposal:
RESOLVED, Shareholders request that our board take the steps
necessary so that each shareholder voting requirement in our
charter and bylaws, that calls for a greater than simple
majority vote, be changed to a majority of the votes cast for
and against the proposal to the fullest extent permitted by law.
This includes each 80% supermajority provision in our charter
and/or
bylaws.
Currently a 1%-minority can frustrate our 79%-shareholder
majority. Also our supermajority vote requirements can be almost
impossible to obtain when one considers abstentions and broker
non-votes. Supermajority requirements are arguably most often
used to block initiatives supported by most shareowners but
opposed by management. For example, a Goodyear (GT) management
proposal for annual election of each director failed to pass
even though 90% of votes cast were yes-votes.
This proposal topic also won from 74% to 88% support at the
following companies in 2009: Weyerhaeuser (WY), Alcoa (AA),
Waste Management (WM), Goldman Sachs (GS), FirstEnergy (FE),
McGraw-Hill (MHP) and Macys (M). The proponents of these
proposals included Nick Rossi, William Steiner, James McRitchie
and Ray T. Chevedden.
The merit of this Simple Majority Vote proposal should also be
considered in the context of the need for improvement in our
companys 2009 reported corporate governance status:
The Corporate Library www.thecorporatelibrary.com, an
independent investment research firm, said our CEO Brian
Markison would receive $17 million in severance if his
employment was ended in connection with a change in control.
This was not in the interests of shareholders as it presented a
conflict of interest by providing a strong financial incentive
for Mr. Markison to pursue such an arrangement. This was
not a practice which fosters a connection between the interests
of executives and shareholders.
We gave 74%-support to a 2009 shareholder proposal calling
for our directors to obtain a majority-vote in order to be
elected a reasonable requirement. This 74%-support
even translated into 59% of all our shares outstanding. However
our board apparently still wants no change to our directors
being able to be reelected if 248 million shares vote
against (withheld) and one lone share votes for.
We also had no shareholder right to ratify executive pay, act by
written consent, call a special meeting, cumulative voting or an
independent board chairman. Shareholder proposals to address all
or some of these topics have received majority votes at other
companies and would be excellent topics for our next annual
meeting.
The above concerns shows there is need for improvement. Please
encourage our board to respond positively to this proposal:
Adopt Simple Majority Vote Yes on 5.
STATEMENT
IN OPPOSITION
The Board of Directors recommends voting AGAINST the proposal
for the following reasons.
The Board believes that the supermajority voting standards in
Kings charter and bylaws are necessary and appropriate
aspects of our corporate governance structure. As discussed
further below, these voting standards of which there
are few ensure that broad shareholder support exists
before significant changes to Kings governance structure
can be implemented, protect the long-term interests of our
shareholders and reflect our commitment to effective corporate
governance. While our Board understands the concerns of the
proponent regarding meaningful shareholder voting and effective
corporate governance practices, the Board does not believe that
this proposal advances the interests of our shareholders or our
corporate governance.
Only a few select actions require a supermajority vote.
The proponents proposal might lead our shareholders to
believe that many items under our charter and bylaws require a
supermajority shareholder vote. In fact, however, a simple
majority voting standard already applies to the vast majority of
matters submitted for shareholder approval under Kings
charter and bylaws. In fact, as set forth in Section 10 of
the
66
charter, only five items under the charter and bylaws require
action by an affirmative vote of 80 percent of Kings
outstanding common stock. These selected items are amendments to:
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charter provisions establishing a one-year term for directors
and eliminating Kings classified Board (which will take
effect at this annual meeting);
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bylaw provisions granting our Board, Chief Executive Officer and
President the right to call special meetings of shareholders
(which right is in addition to the statutory right of holders of
10 percent or more of Kings outstanding common stock
to call special meetings);
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the bylaws advance notice provisions;
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bylaw provisions establishing the nomination process for
Kings directors; and
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charter provisions implementing supermajority voting for the
foregoing items.
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Supermajority voting on these selected items protects the
long-term interests of our shareholders.
The Board believes that each of the current supermajority voting
standards is necessary to safeguard the long-term interests of
our shareholders. These few items are among the central tenets
of Kings corporate governance structure, and the existing
supermajority voting standards are both necessary and
appropriate to ensure that broad shareholder support exists
before significant changes to the companys corporate
governance structure can be implemented. For example, if
shareholders could take action on these items with only a simple
majority vote, a single shareholder, or a group of shareholders
acting in concert, could:
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extend the term of directors to longer than one year or
reestablish a classified Board structure, both of which could
decrease our directors accountability to shareholders;
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eliminate the ability of the Chief Executive Officer and
President to call special meetings of shareholders, which could
limit the opportunities for shareholders to express their
preferences concerning Kings activities and
governance; and
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reduce the time periods within which the Board has to evaluate
and respond to shareholder proposals and shareholder nominations
for directors, which could compromise the effectiveness of the
Boards evaluation processes and impact the overall quality
of our Board and corporate governance structure.
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These examples underscore the appropriateness of the current
supermajority voting standards in safeguarding the interests of
our shareholders. Simply stated, these standards prevent a
limited number of shareholders from acting on corporate
governance matters in their own self-interest to the detriment
of all other shareholders. This could otherwise occur because
shareholders, unlike Kings directors, are not bound by
fiduciary duties to act in a manner that they believe to be in
the best interests of King and all of our shareholders.
King is committed to effective corporate governance and
implementation of this proposal would not enhance Kings
corporate governance practices.
The proponent contends that approval of this proposal would
improve Kings corporate governance. After careful
consideration of the proposal, the Board disagrees with the
proponents contention and, for the reasons discussed
above, believes that implementation of this proposal would
weaken Kings corporate governance. King has long been
committed to effective governance. As described under
Corporate Governance above, the Board has adopted
corporate governance guidelines that are in many instances more
stringent than the governance policies and practices required by
the SEC and NYSE. Further, the Nominating and Corporate
Governance Committee regularly considers and evaluates corporate
governance developments and recommends to the Board
modifications to our corporate governance practices. For
example, Kings shareholders recently approved, at the
recommendation of the Board, amendments to the charter to
eliminate our classified Board structure and to provide for the
annual election of all directors, and King is proposing at this
annual meeting an amendment to its charter to adopt majority
voting in uncontested director elections (see Proposal 2 in this
proxy statement). The Board believes these actions evidence
Kings commitment to effective corporate governance and
that implementing this proposal would undermine that commitment.
67
The
affirmative votes of the shares of common stock present
or represented by proxy at the meeting must exceed the opposing
votes
in order to approve this non-binding shareholder
proposal.
The Board of Directors unanimously recommends a vote
AGAINST the proposal.
OTHER
MATTERS
The Board knows of no matters which will be presented at the
annual meeting other than those discussed in this proxy
statement. However, if any other matters are properly brought
before the meeting, any proxy given pursuant to this
solicitation will be voted in accordance with the
recommendations of management.
A copy of our Annual Report on
Form 10-K
for fiscal 2009 has been posted on the Internet, along with this
Proxy Statement, each of which is accessible by following the
instructions in the Notice of Availability of Proxy Materials.
The Annual Report is not incorporated into this Proxy Statement
and is not considered proxy-soliciting materials.
We filed our Annual Report on
Form 10-K
with the SEC on February 26, 2010. We will mail without
charge, upon the request of a shareholder, a copy of our Annual
Report on
Form 10-K
for fiscal 2009, without exhibits. Requests should be directed
to Broadridge Financial Solutions, Inc. at
(800) 579-1639.
BY ORDER OF THE BOARD OF DIRECTORS
James W. Elrod
Chief Legal Officer and Secretary
Bristol, Tennessee
April 15, 2010
68
Exhibit A
KING
PHARMACEUTICALS, INC
INCENTIVE
PLAN
ARTICLE 1.
Purpose
The purposes of the King Pharmaceuticals, Inc. Incentive
Plan (the Plan) are:
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to foster and promote the long-term financial success of King
Pharmaceuticals, Inc. (the Company) and materially
increase shareholder value by (a) motivating superior
employee performance by means of performance-related incentives,
(b) encouraging and providing for the acquisition of an
ownership interest in the Company, and (c) enabling the
Company to attract and retain the services of employees upon
whose judgment, interest, and effort the successful conduct of
its operations is largely dependent; and
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(a) to encourage stock ownership by Non-Employee Directors
of the Company, (b) to provide such directors with an
additional incentive to oversee the Company effectively and to
contribute to its success and, (c) to provide a form of
compensation which will attract and retain highly qualified
individuals as members of the Board of Directors of the Company.
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The Company has previously adopted the 1997 Incentive and
Nonqualified Stock Option Plan for Employees of King
Pharmaceuticals, Inc. (the Stock Option Plan) and
the 1998 Non-Employee Director Stock Option Plan (the
Non-Employee Director Plan), which were intended to
provide similar equity-based compensation incentives through the
grant of stock options. Effective upon the adoption of the Plan
by shareholders of the Company, the Stock Option Plan and the
Non-Employee Director Plan will be terminated. All outstanding
award grants under either the Stock Option Plan or the
Non-Employee Director Plan shall continue in full force and
effect, subject to their original terms, after the Stock Option
Plan and the Non-Employee Director Plan are terminated.
ARTICLE 2.
Definitions
2.1 Definitions. Whenever used herein, the
following terms shall have the respective meanings set forth
below:
Adjustment Event. Adjustment Event means
any stock dividend, stock split or share combination of, or
extraordinary cash dividend on, the Common Stock or
recapitalization, reorganization, merger, consolidation,
split-up,
spin-off, combination, dissolution, liquidation, exchange of
shares, warrants or rights offering to purchase Common stock at
a price substantially below Fair Market Value, or other similar
event affecting the Common Stock of the Company.
Alternative Awards. Alternative Awards
shall have the meaning set forth in Section 11.3.
Annual Incentive Awards. Annual Incentive
Awards means an Award made pursuant to Article 9 of
the Plan with a Performance Cycle of one year or less.
Approved Retirement. Approved Retirement
means any voluntary termination of employment by the Participant
after having reached the age of fifty-five (55) years and
after having completed at least fifteen (15) years of
continuous employment with the Company. Notwithstanding the
foregoing, with respect only to Participants who reside in the
United States, the term Approved Retirement shall
not apply to any Participant whose employment with the Company
or a Subsidiary has been terminated for Cause.
Award. An Award means the award of an
Annual Incentive Award, a Long-Term Performance Unit Award, an
Option, a SAR, a Restricted Unit, Restricted Stock or
Performance Share, including any associated Dividend
Equivalents, under the Plan, and shall also include an award of
Restricted Stock or Restricted Units (including any associated
Dividend Equivalents) made in conjunction with other incentive
programs established by the Company or its Subsidiaries and so
designated by the Committee.
69
Award Agreement. Award Agreement means
either (i) the written agreement between the Company and
the Participant which contains the specific terms and conditions
of the Award, subject to the general terms and conditions of the
Plan, or (ii) a written or electronic statement issued by
the Company to a Participant describing the terms and provisions
of such Award, including any amendment or modification thereof.
The Committee may provide for the use of electronic, internet or
other non-paper Award Agreements, and the use of electronic,
internet or other non-paper means for the acceptance thereof and
actions thereunder by a Participant.
Beneficial Owner. Beneficial Owner means
any person, as such term is used in
Section 13(d) of the Exchange Act, who, directly or
indirectly, has or shares the right to vote, dispose of, or
otherwise has beneficial ownership of such
securities (within the meaning of
Rule 13d-3
and
Rule 13d-5
under the Exchange Act), including pursuant to any agreement,
arrangement or understanding (whether or not in writing).
Board. Board means the Board of
Directors of the Company.
Cause. Cause means, with respect to a
Participant, any of the following (as determined by the
Committee in its sole discretion or as delegated to management):
(i) dishonesty, fraud or misrepresentation;
(ii) inability to obtain or retain appropriate licenses;
(iii) violation of any rule or regulation of any regulatory
agency or self-regulatory agency; (iv) violation of any
policy or rule of the Company or any Subsidiary;
(v) commission of a crime; (vi) breach by a
Participant of any written covenant or agreement with the
Company or any Subsidiary not to disclose or misuse any
information pertaining to, or misuse any property of, the
Company or any Subsidiary, or (vii) any act or omission
detrimental to the conduct of the business of the Company or any
Subsidiary in any way.
Change of Control. A Change of Control
shall be deemed to have occurred if there has been:
(1) the acquisition by any individual, or persons acting as
a group (Person) of capital stock of the Company
which, when added to any existing ownership held by the Person
as of the date of this Agreement, constitutes more than fifty
percent (50%) of either (A) the total fair market value of
the then outstanding shares of stock of the Company, or
(B) the total voting power of the stock of the Company;
provided, however, that any acquisition by a Person who owns
more than fifty percent (50%) of the total fair market value or
of the total voting power of the stock of the Company as of the
date of this Agreement, then any acquisition of additional
capital stock of the Company by such Person shall not constitute
a Change in Control or an effective Change in Control within the
meaning of paragraph (2), below. For purposes of this paragraph,
an increase in the percentage of capital stock of the Company
owned by a Person as a result of a transaction in which the
Company acquires its stock in exchange for property will be
treated as an acquisition of such stock by such Person. The
provisions of this paragraph will be construed and administered
in accordance with the requirements for compliance with the
provisions of Internal Revenue Service Notice
2005-1,
Q&A 11 and 12, any Treasury Department guidance which
supplements such Notice, or any such guidance which supercedes
such Notice; or
(2) a change in effective control, which shall mean either
(A) the acquisition, within a twelve (12) month period
ending on the date of the most recent acquisition, of not less
than thirty five percent (35%) of the total voting power of the
stock of the Company, or (B) a majority of the members of
the Board of Directors of the relevant corporation is replaced
in any twelve (12) month period by Directors whose
appointment or election is not endorsed by a majority of the
Directors of the relevant corporation prior to the date of the
appointment or election. For purposes of the prior sentence, the
relevant corporation shall mean either (i) the Company,
(ii) a corporation (or all corporations, if more than one
is liable) which is liable for the payment of the compensation
at issue under this Agreement, or (iii) a corporation which
is a majority shareholder of the Company or in a corporation
described in (ii) or any corporation in a chain of
corporations in which each corporation is a majority shareholder
of another corporation in the chain and ending in a corporation
described in (i) or (ii); provided further, however, that
the relevant corporation is only the corporation for which no
other corporation is a majority shareholder. If any person, or
persons acting as a group (Person), is considered
effectively to control the relevant corporation as of the date
of this Agreement, the acquisition of additional control by that
Person will not be considered to cause a Change in Control. The
provisions of this paragraph will be construed and administered
in accordance with the requirements for compliance with the
provisions of Internal Revenue Service Notice
2005-1,
Q&A 13, any Treasury Department guidance which supplements
such Notice, or any such guidance which supercedes such
Notice; or
70
(3) a change in the ownership of a substantial portion of
the Companys assets, which will be deemed to have occurred
on the date that any Person acquires, or has acquired within the
prior twelve (12) month period ending on the date of the
most recent acquisition by such Person, assets of the Company
which have a total gross fair market value of not less than
forty percent (40%) of the total gross fair market value of all
the assets of the Company immediately prior to such
acquisition(s). For purposes of the prior sentence, total gross
fair market value means the value of the assets of the Company
or of the assets being disposed of, determined without regard to
any liabilities associated with such assets. For purposes of
this paragraph, when there is a transfer to an entity which is
controlled by the shareholders of the Company immediately after
the transfer, no Change in Control will be deemed to have
occurred. Neither will a Change in Control be deemed to have
occurred under this paragraph if the assets are transferred to
(A) a shareholder of the Company in exchange for or with
respect to Company stock, (B) an entity 50% or more of the
total value or voting power of which is owned directly or
indirectly by the Company, (C) a Person which owns,
directly or indirectly, fifty percent (50%) or more of the total
value or voting power of all the outstanding stock of the
Company, or (D) an entity, at least fifty percent (50%) of
the total value or voting power of which is owned, directly or
indirectly, by a person described in (C) preceding. For
purposes of the prior sentence, except as otherwise noted a
Persons status is determined immediately after the
transfer of assets. The provisions of this paragraph will be
construed and administered in accordance with the requirements
for compliance with the provisions of Internal Revenue Service
Notice
2005-1,
Q&A 14, any Treasury Department guidance which supplements
such Notice, or any such guidance which supercedes such Notice.
Change of Control Price. Change of Control
Price means the highest price per share of Common Stock
paid in conjunction with any transaction resulting in a Change
of Control (as determined in good faith by the Committee if any
part of the offered price is payable other than in cash) or, in
the case of a Change of Control occurring solely by reason of a
change in the composition of the Board, the highest Fair Market
Value of the Common Stock on any of the 30 trading days
immediately preceding the date on which a Change of Control
occurs.
Code. Code means the Internal Revenue
Code of 1986, as amended, including, for these purposes, any
binding regulations promulgated by the Internal Revenue Service
with respect to the provisions of the Code (Treasury
Regulations), and any successor thereto.
Committee. Committee means the
Compensation and Human Resources Committee of the Board or such
other committee of the Board as the Board shall designate from
time to time, which committee shall consist of three or more
members, each of whom shall be a Non Employee
Director within the meaning of
Rule 16b-3,
as promulgated under the Exchange Act, an outside
director within the meaning of section 162(m) of the
Code, and an independent director under
Section 303A of the New York Stock Exchanges Listed
Company Manual, or any successors thereto.
Common Stock. Common Stock means the
common stock of the Company, no par value per share.
Company. Company means King
Pharmaceuticals, Inc., a Tennessee corporation, and any
successor thereto.
Corporate Event. Corporate Event means a
merger, consolidation, recapitalization or reorganization, share
exchange, division, sale, plan of complete liquidation or
dissolution, or other disposition of all or substantially all of
the assets of the Company, which has been approved by the
shareholders of the Company.
Covered Employees. Covered Employees are
any Executive Officers or other Employee who is or may become a
Covered Employee within the meaning of Code
section 162(m) and who is designated, either as an
individual Employee or class of Employees, by the Committee
within the shorter of (i) ninety (90) days after the
beginning of the Performance Period, or (ii) twenty-five
percent (25%) of the Performance Period has elapsed, as a
Covered Employee under this Plan for such applicable
Performance Period.
Disability. Disability means with
respect to any Participant, (a) in the case of an Award
which is not subject to Section 409A of the Code, a
long-term disability (but not optional long-term disability
coverage) as defined under the welfare benefit plan maintained
by either the Company or a Subsidiary and in which the
Participant participates and from which the Participant is
receiving a long-term disability benefit. In jurisdictions
outside of the United States where long-term disability is
covered by a mandatory or universal program sponsored by the
government or an industrial association, a Participant receiving
long-term disability benefits from such a program is considered
to meet the disability definition of the Plan; or (b) in
the case of an Award which is subject to Section 409A of
the Code, a 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
71
twelve months and which either (i) renders the individual
incapable of engaging in any substantial gainful employment, or
(ii) entitles the individual to income replacement benefits
for a period of at least three months under an accident and
health plan of the Company covering its employees.
Dividends. Dividends means the regular
cash dividends, if any, paid by the Company upon one share of
Common Stock from time to time.
Dividend Equivalents. Dividend
Equivalents means an amount equal to the regular cash
dividends or any other form of dividend issued by the Company,
if any, paid by the Company upon one share of Common Stock in
connection with the grant of Restricted Units, Performance
Shares, Options,
and/or SARs
awarded to a Participant in accordance with Article 8 of
the Plan.
Effective Date. Effective Date generally
means the first date upon which the Plan shall become effective,
which will be the date the Plan has been both (a) approved
by the Board and (b) approved by a majority of the votes
cast at a duly held shareholders meeting at which the
requisite quorum, as set forth in the Companys Amended and
Restated Charter, of outstanding voting stock of the Company is,
either in person or by proxy, present and voting on the Plan.
However, for purposes of any Option grant that is an ISO, the
term Effective Date shall mean solely the adoption
of the Plan by the Board.
Employee. Employee means any person
designated as an employee of the Company
and/or its
Subsidiaries on the payroll records thereof. An Employee shall
not include any individual during any period he or she is
classified or treated by the Company
and/or
Subsidiary as an independent contractor, a consultant, or an
employee of an employment, consulting, or temporary agency or
any other entity other than the Company
and/or
Subsidiary without regard to whether such individual is
subsequently determined to have been, or is subsequently
retroactively reclassified as a common-law employee of the
Company
and/or
Subsidiary during such period.
Exchange Act. Exchange Act means the
Securities Exchange Act of 1934, as amended.
Executive Officer. Executive Officer
means each person who is an officer of the Company or any
Subsidiary and who is subject to the reporting requirements
under Section 16(a) of the Exchange Act.
Fair Market Value. Except as otherwise provided in
any Award Agreement, Fair Market Value means, on any
date, the price of the last trade, regular way, in the Common
Stock on such date on the New York Stock Exchange or, if at the
relevant time, the Common Stock is not listed to trade on the
New York Stock Exchange, on such other recognized quotation
system on which the trading prices of the Common Stock are then
quoted (the Applicable Exchange). In the event that
(i) there are no Common Stock transactions on the
Applicable Exchange on any relevant date, Fair Market Value for
such date shall mean the closing price on the immediately
preceding date on which Common Stock transactions were so
reported and (ii) the Applicable Exchange adopts a trading
policy permitting trades after 4 P.M. Eastern Standard Time
(EST), Fair Market Value shall mean the last trade,
regular way, reported on or before 4 P.M. EST (or such
earlier or later time as the Committee may establish from time
to time).
Family Member. Family Member means, as
to a Participant, any (i) child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law
or
sister-in-law
(including adoptive relationships) of such Participant,
(ii) trusts for the exclusive benefit of one or more such
persons
and/or the
Participant and (iii) other entity owned solely by one or
more such persons
and/or the
Participant.
Full-Value Award. Full-Value Award means
Restricted Stock, Restricted Unit, Performance Share or other
stock-based Award that the Committee determines more closely
resembles Restricted Stock, Restricted Unit or Performance
Share, other than an Option or SAR.
Grandfathered Awards. Grandfathered
Awards shall have the meaning set forth in
Section 5.5 herein.
Incumbent Directors. Incumbent Directors
means, with respect to any period of time specified under the
Plan for purposes of determining a Change of Control, the
persons who were members of the Board at the beginning of such
period.
ISO. ISO means an Option that is an
incentive stock option within the meaning of Code
section 422.
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Long-Term Performance Unit Award. A Long-Term
Performance Unit Award means an Award made pursuant to
Article 9 of the Plan, which are units valued by reference
to property other than Common Stock (including cash), the number
or value of such units which may be adjusted over a Performance
Cycle based on the satisfaction of Performance Goals.
Non-Employee Director. Non-Employee
Director means a member of the Board of Directors who is
considered a non-employee director within the meaning of the
Exchange Act
Rule 16b-3(b)(3)
or its successor provision.
Non-Employee Director Plan. Non-Employee
Director Plan means the 1998 Non-Employee Director Stock
Option Plan.
Nonstatutory Stock Option. Nonstatutory Stock
Option means an Option that is not an ISO.
Option (including ISOs and Nonstatutory Stock
Options). Option means the right to
purchase Common Stock at a stated price for a specified period
of time. For purposes of the Plan, an Option may be either
(i) an ISO or (ii) a Nonstatutory Stock Option.
Participant. Participant shall have the
meaning set forth in Article 3 of the Plan.
Performance Cycle. Performance Cycle
means the period, not to exceed five (5) years or other
period selected by the Committee, during which the performance
of the Company or any Subsidiary or unit thereof or any
individual is measured for the purpose of determining the extent
to which an Award subject to Performance Goals has been earned.
Performance Goals. Performance Goals
means the objectives for the Company, any Subsidiary or business
unit thereof, or a Participant that may be established by the
Committee for a Performance Cycle with respect to any
performance-based Awards contingently granted under the Plan.
The Performance Goals for Awards that are intended to constitute
performance-based compensation within the meaning of
Section 162(m) of the Code shall be based on one or more of
the following criteria: earnings per share, total shareholder
return, operating income, net income, cash flow, gross profit,
gross profit return on investment, return on equity, return on
capital, sales, revenue, gross margin and gross margin return on
investment.
Performance Shares. Performance Shares
means an Award made pursuant to Article 9 of the Plan,
which are units denominated in Common Stock, the number of such
units which may be adjusted over a Performance Cycle based upon
the satisfaction of Performance Goals.
Person. Person means any person (within
the meaning of Section 3(a)(9) of the Exchange Act),
including any group (within the meaning of
Rule 13d-5(b)
under the Exchange Act)), but excluding any of the Company, any
Subsidiary or any employee benefit plan sponsored or maintained
by the Company or any Subsidiary.
Plan Year. Plan Year means a period of
twelve months commencing on January 1st and ending on
the next December 31st.
Restricted Period. Restricted Period
means the period of time during which Restricted Units or shares
of Restricted Stock are subject to forfeiture or restrictions on
transfer (if applicable) pursuant to Article 8 of the Plan.
Restricted Stock. Restricted Stock means
Common Stock awarded to a Participant pursuant to the Plan that
is subject to forfeiture and restrictions on transferability in
accordance with Article 8 of the Plan.
Restricted Unit. Restricted Unit means a
Participants right to receive, pursuant to this Plan, one
share of Common Stock or its equivalent in cash at the end of a
specified period of time, which right is subject to forfeiture
in accordance with Article 8 of the Plan.
SAR. SAR means a stock appreciation
right granted under Article 7 in respect of one or more
shares of Common Stock that entitles the holder thereof to
receive, in cash or Common Stock, at the discretion of the
Committee (which discretion may be exercised at grant, including
after exercise of the SAR), an amount per share of Common Stock
equal to the excess, if any, of the Fair Market Value on the
date the SAR is exercised over the Fair Market Value on the date
the SAR is granted.
Separation from Service. A Separation from
Service shall have the meaning contemplated in
Section 409A(a)(2)(A)(i) of the Code.
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Stock Option Plan. Stock Option Plan
means the 1997 Incentive and Nonqualified Stock Option Plan for
Employees of King Pharmaceuticals, Inc., as amended from time to
time.
Subsidiary. Subsidiary means any
corporation or partnership in which the Company owns, directly
or indirectly, more than fifty percent (50%) of the total
combined voting power of all classes of stock of such
corporation or of the capital interest or profits interest of
such partnership.
2.2 Gender and Number. Except when otherwise
indicated by the context, words in the masculine gender used in
the Plan shall include the feminine gender, the singular shall
include the plural, and the plural shall include the singular.
ARTICLE 3.
Eligibility
and Participation
3.1 Participants. Participants in the Plan
shall be those Employees and Non-Employee Directors designated
by the affirmative action of the Committee (or its delegate) to
participate in the Plan.
3.2 Types of Awards. The Committee (or its
delegate) may grant any or all of the Awards specified herein to
any particular Participant (subject to the applicable
limitations set forth in the Plan). Any Award may be made for
one (1) year or multiple years without regard to whether
any other type of Award is made for the same year or years. The
term of any Award granted may not exceed ten (10) years
from the date the Award is granted.
ARTICLE 4.
Powers of
the Committee
4.1 Power to Grant. The Committee shall have
the authority, subject to the terms of the Plan, to determine
those individuals to whom Awards shall be granted and the terms
and conditions of any and all Awards as set out in the Award
Agreement including, but not limited to:
(a) the number of shares of Common Stock to be covered by
each Award;
(b) the time or times at which Awards shall be granted;
(c) the terms and provisions of the instruments by which
Options may be evidenced, including the designation of Options
as ISOs or Nonstatutory Stock Options;
(d) the determination of the period of time during which
restrictions on Restricted Stock or Restricted Units shall
remain in effect;
(e) the establishment and administration of any Performance
Goals applicable to Awards granted under the Plan; and
(f) the determination of Participants Long Term
Performance Unit Awards or Performance Share Awards, including
any Performance Goals and Performance Cycles.
4.2 Administration.
(a) Rules, Interpretations and
Determinations. The Committee shall administer the
Plan. Any Award granted by the Committee under the Plan may be
subject to such conditions, not inconsistent with the terms of
the Plan, as the Committee shall determine. The Committee shall
have full authority to interpret and administer the Plan, to
establish, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions deemed necessary or
advisable to protect the interests of the Company, to construe
the respective Award Agreements and to make all other
determinations necessary or advisable for the administration and
interpretation of the Plan in order to carry out its provisions
and purposes. Determinations, interpretations, or other actions
made or taken by the Committee shall be final, binding, and
conclusive for all purposes and upon all persons.
The Committees determinations under the Plan (including
the determination of the Participants to receive Awards, the
form, amount and timing of such Awards, the terms and provisions
of such Awards and the related Award Agreements) may vary, and
need not be uniform, whether or not any such Participants could
be deemed to be similarly situated.
74
(b) Agents and Expenses. The Committee may
appoint agents (who may be officers or employees of the Company)
to assist in the administration of the Plan and may grant
authority to such persons to execute agreements or other
documents on its behalf. All expenses incurred in the
administration of the Plan, including, without limitation, for
the engagement of any counsel, consultant or agent, shall be
paid by the Company. The Committee may consult with legal
counsel, who may be counsel to the Company, and shall not incur
any liability for any action taken in good faith in reliance
upon the advice of counsel. Any proceeds received by the Company
in connection with any Award will be used for general corporate
purposes.
(c) Delegation of Authority. Notwithstanding
anything else contained in the Plan to the contrary herein, the
Committee may delegate, subject to such terms or conditions or
guidelines as it shall determine, to any Employee of the Company
or any group of Employees of the Company or its Subsidiaries any
portion of its authority and powers under the Plan with respect
to Participants who are not Executive Officers. Only the
Committee may select, grant, administer, or exercise any other
discretionary authority under the Plan in respect of Awards
granted to such Participants who are Executive Officers.
4.3 Participants Based Outside the United
States. Notwithstanding anything to the contrary
herein, the Committee, to conform with provisions of local laws
and regulations in foreign countries in which the Company or its
Subsidiaries operate, shall have sole discretion to
(a) modify the terms and conditions of Awards granted to
Participants employed outside the United States,
(b) establish subplans with modified exercise procedures
and such other modifications as may be necessary or advisable
under the circumstances presented by local laws and regulations;
and (c) take any action which it deems advisable to obtain,
comply with or otherwise reflect any necessary governmental
regulatory procedures, exemptions or approvals with respect to
the Plan or any subplan established hereunder.
4.4 Newly Eligible Participants. The Committee
shall be entitled to make such rules, determinations and
adjustments, as it deems appropriate with respect to any
Participant who becomes eligible to receive a performance-based
Award after the commencement of a Performance Cycle.
4.5 Restrictive Covenants and Other
Conditions. Without limiting the generality of the
foregoing, the Committee may condition the grant of any Award
under the Plan upon the Participant to whom such Award would be
granted agreeing in writing to certain conditions in addition to
the provisions regarding exercisability of the Award (such as
restrictions on the ability to transfer the underlying shares of
Common Stock) or covenants in favor of the Company
and/or one
or more Subsidiaries (including, without limitation, covenants
not to compete, not to solicit employees and customers and not
to disclose confidential information) that may have effect
during or following the termination of the Participants
employment with the Company and its Subsidiaries and before or
after the Award has been exercised, including, without
limitation, the requirement that the Participant disgorge any
profit, gain or other benefit received in respect of the
exercise of the Award prior to any breach of any such covenant
by the Participant).
4.6 Performance Based Compensation Interpretations;
Limitations on Discretion. Notwithstanding anything
contained in the Plan to the contrary, to the extent the
Committee has required upon grant that any Annual Incentive
Award, Long-Term Performance Unit Award, Performance Share,
Restricted Unit or Restricted Stock must qualify as other
performance based compensation within the meaning of
Section 162(m)(4)(c) of the Code, the Committee shall
(a) specify and approve the specific terms of any
Performance Goals with respect to such Awards in writing no
later than ninety (90) days from the commencement of the
Performance Cycle to which the Performance Goal or Goals relate,
unless the Performance Cycle is less that twelve
(12) months , then the Performance Goal or Goals must be
set within the first twenty-five 25% of the duration of the
Performance Cycle, and (b) not be entitled to exercise any
subsequent discretion otherwise authorized under the Plan (such
as the right to authorize payout at a level above that dictated
by the achievement of the relevant Performance Goals) with
respect to such Award if the ability to exercise discretion (as
opposed to the exercise of such discretion) would cause such
Award to fail to qualify as other performance based compensation.
4.7 Indemnification. No member of the Committee
shall be personally liable for any action, omission or
determination relating to the Plan, and the Company shall
indemnify and hold harmless each member of the Committee and
each other director or employee of the Company to whom any duty
or power relating to the administration or interpretation of the
Plan has been delegated, against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement
of a claim with the approval of the Committee) arising out of
any action, omission or determination related to the Plan, if,
in either case, such member, director or employee made or took
such action, omission, or determination in good faith and in a
manner such person reasonably believed to be in or not opposed
to the best interests of the Company, and, with respect to any
criminal action or proceeding, such person had no reasonable
cause to believe his or her conduct was unlawful.
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ARTICLE 5.
Common Stock
Subject to Plan; Other Limitations
5.1 Plan Limits.
(a) Shares Available for Awards. Subject
to the provisions of Section 5.4, the number of shares of
Common Stock issuable under the Plan for Awards shall be
30,000,000.
(b) The shares to be delivered under the Plan may consist,
in whole or in part, of Common Stock purchased by the Company
for such purpose, treasury Common Stock or authorized but
unissued Common Stock, not reserved for any other purpose.
(c) Subject to the limit set forth in section 5.1(a)
on the number of shares of Common Stock that may be issued in
the aggregate under this Plan, the maximum number of shares that
may be issued pursuant to ISOs shall be 30,000,000.
5.2 Individual Award Limitations. Subject to
the provisions of Section 5.4, during any three
(3) year period, the total number of shares of Common Stock
subject to Options and SARs awarded to any Participant may not
exceed 9,000,000 and Full-Value Awards may not exceed 3,000,000.
5.3 Cancelled, Terminated, or Forfeited
Awards. Should an Award under this Plan (including, for
these purposes, any award under the Stock Option Plan or the
Non-Employee Director Plan made prior to the Effective Date) for
any reason expire without having been exercised, be cancelled,
repurchased by the Company, terminated or forfeited or otherwise
settled without the issuance of any Common Stock (including, but
not limited to, shares tendered to exercise outstanding Options,
shares tendered or withheld for taxes on Awards or shares issued
in connection with a Restricted Stock or Restricted Unit Award
that are subsequently forfeited), any such shares of Common
Stock subject to such Award shall again be available for grants
of Awards under the Plan. Of those shares outstanding under the
Stock Option Plan or the Non-Employee Director Plan, only
5,900,000 out of 5,900,000 outstanding shall be available for
grants of Awards under the provisions of this Section 5.3.
5.4 Adjustment in Capitalization. In the event
of any Adjustment Event, (a) the aggregate number of shares
of Common Stock available for Awards under Section 5.1,
(b) the aggregate limitations on the number of shares that
may be awarded as a particular type of Award or that may be
awarded to any particular Participant in any particular period
under Section 5.2 and (c) the aggregate number of
shares subject to outstanding Awards and the respective exercise
prices or base prices applicable to outstanding Awards shall be
appropriately adjusted by the Committee, in its discretion, with
respect to such Adjustment Event, and the Committees
determination shall be conclusive. To the extent deemed
equitable and appropriate by the Committee and subject to any
required action by shareholders of the Company, in any
Adjustment Event that is a merger, consolidation,
reorganization, liquidation, dissolution or similar transaction,
any Award granted under the Plan shall be deemed to pertain to
the securities and other property, including cash, to which a
holder of the number of shares of Common Stock covered by the
Award would have been entitled to receive in connection with
such Adjustment Event.
Any shares of stock (whether Common Stock, shares of stock into
which shares of Common Stock are converted or for which shares
of Common Stock are exchanged or shares of stock distributed
with respect to Common Stock) or cash or other property received
with respect to any award of Restricted Stock or Restricted
Units granted under the Plan as a result of any Adjustment Event
or any distribution of property shall, except as provided in
Article 11 or as otherwise provided by the Committee, be
subject to the same terms and conditions, including restrictions
on transfer, as are applicable to such shares of Restricted
Stock or Restricted Units and any stock certificate(s)
representing or evidencing any shares of stock so received shall
be legended in such manner as the Company deems appropriate.
5.5 Application of Limits. The limitations set
forth under Sections 5.1 and 5.2 herein apply only to
Awards both granted and payable to Participants after the
Effective Date under this Plan. With respect to any other
compensation or performance based awards previously made to
individuals prior to the Effective Date under some other
compensation plan or program sponsored by the Company or its
Subsidiaries, which become due or payable after the Effective
Date of this Plan (the Grandfathered Awards), the
limitations set forth under Sections 5.1 and 5.2 will not
be deemed to apply to such Grandfathered Award payments.
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ARTICLE 6.
Stock Options
6.1 Grant of Options. Subject to the provisions
of Section 5.1, Options may be granted to Participants at
such time or times as shall be determined by the Committee.
Options granted under the Plan may be of two types:
(i) ISOs and (ii) Nonstatutory Stock Options. Except
as otherwise provided herein, the Committee shall have complete
discretion in determining the number of Options, if any, to be
granted to a Participant, except that ISOs may only be granted
to Employees who satisfy the requirements for eligibility set
forth under Code section 422. The date of grant of an
Option under the Plan will be the date on which the Option is
awarded by the Committee or, if so determined by the Committee,
the date on which occurs any event (including, but not limited
to, the completion of an individual or corporate Performance
Goal) the occurrence of which is an express condition precedent
to the grant of the Option. Subject to Section 5.4, the
Committee shall determine the number of Options, if any, to be
granted to the Participant. Each Option grant shall be evidenced
by an Award Agreement that shall specify the type of Option
granted, the exercise price, the duration of the Option, the
number of shares of Common Stock to which the Option pertains,
and such other terms and conditions as the Committee shall
determine which are not inconsistent with the provisions of the
Plan. Options may be granted in tandem with SARs (as described
in more detail in Article 7),
and/or with
associated Dividend Equivalents (as described in more detail in
Article 8).
6.2 Exercise Price. Nonstatutory Stock Options
and ISOs granted pursuant to the Plan shall have an exercise
price no less than the Fair Market Value of a share of Common
Stock on the date the Option is granted.
6.3 Exercise of Options. Unless the Committee
shall determine otherwise at the time of grant, one-third ( 1/3)
of each Option granted pursuant to the Plan shall become
exercisable on each of the first three (3) (or other vesting
schedule as provided in the related agreement) anniversaries of
the date such Option is granted; provided that the Committee may
establish performance-based criteria for exercisability of any
Option. Subject to the provisions of this Article 6, once
any portion of any Option has become exercisable it shall remain
exercisable for its remaining term. Once exercisable, an Option
may be exercised from time to time, in whole or in part, up to
the total number of shares of Common Stock with respect to which
it is then exercisable. The Committee shall determine the term
of each Option granted, but in no event shall any such Option be
exercisable for more than 10 years after the date on which
it is granted.
6.4 Payment. The Committee shall establish
procedures governing the exercise of Options. No shares shall be
delivered pursuant to any exercise of an Option unless
arrangements satisfactory to the Committee have been made to
assure full payment of the exercise price therefore. Without
limiting the generality of the foregoing, payment of the
exercise price may be made: (a) in cash or its equivalent
or (b) through an arrangement with a broker approved by the
Company whereby payment of the exercise price is accomplished
with the proceeds of the sale of Common Stock; or (c) by
any combination of the foregoing; provided that the combined
value of all cash and cash equivalents paid and the Fair Market
Value of any such Common Stock so tendered to the Company,
valued as of the date of such tender, is at least equal to such
exercise price. The Company may not make a loan to a Participant
to facilitate such Participants exercise of any of his or
her Options or payment of taxes.
6.5 ISOs. Notwithstanding anything in the Plan
to the contrary, no Option that is intended to be an ISO may be
granted after the tenth anniversary of the Effective Date of the
Plan. Except as may otherwise be provided for under the
provisions of Article 11 of the Plan, no term of this Plan
relating to ISOs shall be interpreted, amended or altered, nor
shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the ISO or the Plan under
Section 422 of the Code, or, without the consent of any
Participant affected thereby, to disqualify any ISO under such
Section 422.
6.6 Termination of Employment. Unless otherwise
determined by the Committee at the time of grant, the following
provisions of the Plan shall apply in the event of the
Participants termination of employment:
(a) Due to Death. In the event a
Participants employment terminates by reason of death, any
Options granted to such Participant shall become immediately
vested in full and may be exercised by the Participants
estate or as may otherwise be provided for in accordance with
the requirements of Section 12.2, at any time prior to the
expiration of the term of the Options or two years following the
Participants death, whichever period is shorter (or such
other date as the Committee shall determine at the time of
grant).
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(b) Due to Disability. In the event a
Participants employment is terminated by his or her
employer by reason of Disability, any Options granted to such
Participant shall become immediately vested in full and may be
exercised by the Participant (or, in the event of the
Participants death after termination of employment when
the Option is exercisable pursuant to its terms, by the
Participants designated beneficiary, and if none is named,
by the person determined in accordance with the requirements of
Section 13.2), at any time prior to the expiration of the
term of the Options or one year following the Participants
termination of employment, whichever period is shorter (or such
other period as the Committee shall determine at the time of
grant).
(c) Due to Approved Retirement. In the event a
Participants employment terminates by reason of Approved
Retirement, any Options granted to such Participant which are
then outstanding shall continue to vest as set forth in the
agreements relating to the Options and may be exercised by the
Participant (or, in the event of the Participants death
after termination of employment when the Option is exercisable
pursuant to its terms, by the Participants estate or as
otherwise may be provided for in accordance with
Section 13.2), at any time prior to the expiration of the
term of the Options (or such other period as the Committee shall
determine at the time of grant).
(d) Due to Cause. In the event a
Participants employment is terminated by the Company or
any Subsidiary for Cause, any Options granted to such
Participant that are then not yet exercised shall be forfeited
at the time of such termination and shall not be exercisable
thereafter and the Committee may, consistent with
Section 4.5 of the Plan, require that such Participant
disgorge any profit, gain or other benefit received in respect
of the exercise of any such Award for a period of up to twelve
(12) months prior to the Participants termination of
employment for Cause. For purposes of this Section 6.6, in
the event a Participants employment is terminated by the
Company or any Subsidiary for Cause, the provisions of this
Section 6.6(d) will apply notwithstanding any assertion (by
the Participant or otherwise) of a termination of employment for
any other reason enumerated under this Section.
(e) Due to Resignation. In the event a
Participants employment ends as a result of such
Participants resignation from the Company or any
Subsidiary, any Options granted to such Participant that are
then not yet exercised may be exercised by the Participant (or,
in the event of the Participants death after termination
of employment when the Option is exercisable pursuant to its
terms, by the Participants estate or as may otherwise be
provided for in accordance with the requirements of
Section 13.2) at any time prior to the ninetieth (90th) day
following the Participants termination of employment (or
such other period as the Committee shall determine at the time
of grant) and any Options that are not vested at the time of
termination of employment shall be forfeited at the time of such
termination and shall not vest thereafter.
(f) Due to Any Other Reason. In the event the
employment of the Participant shall terminate for any reason
other than one described in Section 6.6 (a) through
(e), any Options granted to such Participant which are
exercisable at the date of the Participants termination of
employment may be exercised by the Participant (or, in the event
of the Participants death after termination of employment
when the Option is exercisable pursuant to its terms, by the
Participants estate or as may otherwise be provided for in
accordance with the requirements of Section 13.2) at any
time prior to the expiration of the term of the Options or the
ninetieth (90th) day following the Participants
termination of employment, whichever period is shorter, and any
Options that are not vested at the time of termination of
employment shall be forfeited at the time of such termination
and shall not vest thereafter.
ARTICLE 7.
Stock
Appreciation Rights (SARS)
7.1 Grant of SARs. SARs may be granted to any
Participants, all Participants or any class of Participants at
such time or times as shall be determined by the Committee. SARs
may be granted in tandem with an Option, on a freestanding
basis, not related to any other Award,
and/or with
associated Dividend Equivalents. A grant of a SAR shall be
evidenced in writing, whether as part of the agreement governing
the terms of the Option, if any, to which such SARs relate or
pursuant to a separate written agreement with respect to
freestanding SARs, in each case containing such provisions not
inconsistent with the Plan as the Committee shall approve.
7.2 Terms and Conditions of
SARs. Notwithstanding the provisions of
Section 7.1, unless the Committee shall otherwise determine
the terms and conditions (including, without limitation, the
exercise period of the SAR, the vesting schedule applicable
thereto and the impact of any termination of service on the
Participants rights with respect to the
78
SAR) applicable with respect to (i) SARs granted in tandem
with an Option shall be substantially identical (to the extent
possible taking into account the differences related to the
character of the SAR) to the terms and conditions applicable to
the tandem Options and (ii) freestanding SARs shall be
substantially identical (to the extent possible taking into
account the differences related to the character of the SAR) to
the terms and conditions that would have been applicable under
Section 6 were the grant of the SARs a grant of an Option
(including, but not limited to, the application of
Section 6.6).
7.3 Exercise of Tandem SARs. SARs that are
granted in tandem with an Option may only be exercised upon the
surrender of the right to exercise such Option for an equivalent
number of shares and may be exercised only with respect to the
shares of Stock for which the related Award is then exercisable.
7.4 Payment of SAR Amount. Upon exercise of a
SAR, the holder shall be entitled to receive payment, in cash,
in shares of Common Stock or in a combination thereof, as
determined by the Committee, of an amount determined by
multiplying:
(a) the excess, if any, of the Fair Market Value of a share
of Common Stock at the date of exercise over the Fair Market
Value of a share of Common Stock on the date of grant, by
(b) the number of shares of Common Stock with respect to
which the SARs are then being exercised;
provided, however, that at the time of grant with respect to any
SAR payable in cash, the Committee may establish, in its sole
discretion, a maximum amount per share which will be payable
upon the exercise of such SAR.
ARTICLE 8.
Restricted
Stock, Restricted Units and Dividend Equivalents
8.1 Grant of Restricted Stock and Restricted
Units. The Committee, in its sole discretion, may make
Awards to Participants of Restricted Stock or Restricted Units.
Any Award made hereunder of Restricted Stock or Restricted Units
shall be subject to the terms and conditions of the Plan and to
any other terms and conditions not inconsistent with the Plan
(including, but not limited to, requiring the Participant to pay
the Company an amount equal to the par value per share for each
share of Restricted Stock awarded) as shall be prescribed by the
Committee in its sole discretion, either at the time of grant or
thereafter. As determined by the Committee, with respect to an
Award of Restricted Stock, the Company shall either
(i) transfer or issue to each Participant to whom an award
of Restricted Stock has been made the number of shares of
Restricted Stock specified by the Committee or (ii) hold
such shares of Restricted Stock for the benefit of the
Participant for the Restricted Period. In the case of an Award
of Restricted Units, no shares of Common Stock shall be issued
at the time an Award is made, and the Company shall not be
required to set aside a fund for the payment of such Award.
Dividends or Dividends Equivalents (if connected with the grant
of Restricted Units) may be subject to the same terms and
conditions as the underlying Award of Restricted Stock or
Restricted Units.
8.2 Grant, Terms and Conditions of Dividend
Equivalents. The Committee, in its sole discretion, may
make Awards to Participants of Dividend Equivalents in
connection with the grant of Restricted Units, Options, SARs
and/or
Performance Shares. Unless the Committee shall otherwise
determine, the terms and conditions (including, without
limitation, the vesting schedule applicable thereto and the
impact of any termination of service on the Participants
rights with respect to the Dividend Equivalent) shall be
substantially identical (to the extent possible taking into
account the differences related to the character of the Dividend
Equivalent) to the terms and conditions applicable to the
associated Award.
8.3 Restrictions On Transferability. Shares of
Restricted Stock and Restricted Units may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered by
the Participant during the Restricted Period, except as
hereinafter provided. Notwithstanding the foregoing, the
Committee may permit (on such terms and conditions as it shall
establish) shares of Restricted Stock and Restricted Units to be
transferred during the Restricted Periods pursuant to
Section 13.1, provided that any shares of Restricted Stock
or Restricted Units so transferred shall remain subject to the
provisions of this Article 8.
8.4 Rights as a Shareholder. Except for the
restrictions set forth herein and unless otherwise determined by
the Committee, the Participant shall have all of the rights of a
shareholder with respect to such shares of Restricted Stock,
including but not limited to, the right to vote and the right to
receive dividends. A Participant shall not have any right, in
79
respect of Restricted Units or Dividend Equivalents awarded
pursuant to the Plan, to vote on any matter submitted to the
Companys shareholders until such time as the shares of
Common Stock attributable to such Restricted Units (and, if
applicable, Dividend Equivalents) have been issued.
8.5 Restricted Period. Unless the Committee
shall otherwise determine at the date an Award of Restricted
Stock or Restricted Units (including any Dividend Equivalents
issued in connection with such Restricted Units) is made to the
Participant by the Committee, the Restricted Period shall
commence upon the date of grant by the Committee and shall lapse
with respect to the shares of Restricted Stock or Restricted
Units on the third (3rd) anniversary of the date of grant,
unless sooner terminated as otherwise provided herein.
8.6 Legending or Equivalent. To the extent that
certificates are issued to a Participant in respect of shares of
Restricted Stock awarded under the Plan (or in the event that
such Restricted Stock is held electronically), such shares shall
be registered in the name of the Participant and shall have such
legends (or account restrictions) reflecting the restrictions of
such Awards in such manner as the Committee may deem appropriate.
8.7 Termination of Employment. Unless the
Committee shall otherwise determine at the date of grant:
(a) Due to Death. In the event of a
Participants Separation from Service by reason of death,
the Restricted Period will lapse as to the entire portion of the
shares of Restricted Stock
and/or
Restricted Units (including any associated Dividend Equivalents)
transferred or issued to such Participant under the Plan.
(b) Due to Disability. In the event of a
Participants Separation from Service by reason of
Disability, the Restricted Period will lapse as to the entire
portion of the shares of Restricted Stock
and/or
Restricted Units (including any associated Dividend Equivalents)
transferred or issued to such Participant under the Plan.
(c) Due to Approved Retirement. In the event of
a Participants Separation from Service by reason of
Approved Retirement, the Restricted Period will lapse as to the
entire portion of the shares of Restricted Stock
and/or
Restricted Units transferred or issued to such Participant under
the Plan (including any associated Dividend Equivalents).
(d) Due to Cause. In the event of a
Participants Separation from Service by the Company or any
Subsidiary for Cause, any Restricted Stock or Restricted Units
(including any associated Dividend Equivalents) granted to such
Participant shall be forfeited at the time of such termination,
and the Committee may, consistent with Section 4.5 of the
Plan, require that such Participant disgorge any profit, gain or
other benefit received in respect of the lapse of restrictions
on any prior grant of Restricted Stock or Restricted Units
(including any Dividend Equivalents) for a period of up to
twelve (12) months prior to the Participants
termination of employment for Cause. For purposes of this
Section 8.7, in the event a Participants employment
is terminated by the Company or any Subsidiary for Cause, the
provisions of this Section 8.7(d) will apply
notwithstanding any assertion (by the Participant or otherwise)
of a termination of employment for any other reason enumerated
under this Section.
(e) Due to Resignation. In the event of a
Participants Separation from Service as a result of such
Participants resignation from the Company or any
Subsidiary, any Restricted Stock granted to such Participant and
all Restricted Units (including any associated Dividend
Equivalents) credited to such Participant shall be forfeited
upon the Participants termination of employment.
(f) Due to Any Other Reason. In the event of a
Participants Separation from Service by the Company or any
Subsidiary for any other reason during the applicable vesting
period, the Participant (or the Participants estate or
beneficiaries, if the Participant subsequently dies) shall
receive a payment calculated in the following manner:
(i) the number of shares of Restricted Stock or Restricted
Units granted will be reduced by multiplying the grant by a
fraction, the numerator of which is the number of full months in
the applicable vesting period during which the Participant was
an active employee and the denominator of which is the number of
months in the applicable vesting period (with a partial month
worked shall be counted as a full month if the Participant is an
active employee for 15 days or more in that month); and
(ii) the resulting reduced number of Restricted Stock or
Restricted Units shall be considered vested and payment of such
pro-rated Awards is to be made to the Participant (or
beneficiaries or estate, if the Participant subsequently dies)
as soon as practicable after the Participants termination
of employment.
8.8 Issuance of New Certificate or Equivalent;
Settlement of Restricted Units and Dividend
Equivalents. Upon the lapse of the Restricted Period
with respect to any shares of Restricted Stock, such shares
shall no longer be subject to the restrictions imposed under
Section 8.3 and the Company shall issue or have issued new
share certificates (or remove any
80
such restrictions that may have been established electronically)
without the legend or equivalent described in Section 8.6
in exchange for those previously issued. Upon the lapse of the
Restricted Period with respect to any Restricted Units, the
Company shall deliver to the Participant, or the
Participants beneficiary or estate, as provided in
Section 13.2, one share of Common Stock for each Restricted
Unit as to which restrictions have lapsed and any Dividend
Equivalents credited with respect to such Restricted Units and
any interest thereon. The Committee may, in its sole discretion,
elect to pay cash or part cash and part Common Stock in
lieu of delivering only Common Stock for Restricted Units
and/or
Dividend Equivalents. If a cash payment is made in lieu of
delivering Common Stock for Restricted Units, the amount of such
cash payment for each share of Common Stock to which a
Participant is entitled shall be equal to the Fair Market Value
of the Common Stock on the date on which the Restricted Period
lapsed with respect to the related Restricted Unit.
8.9 Section 83(b) Election. The Committee
may provide in an Award Agreement that the Award of Restricted
Stock is conditioned upon the Participants making or
refraining from making an election with respect to the Award
under Code Section 83(b). If a Participant makes an
election pursuant to Code Section 83(b) concerning a
Restricted Stock Award, the Participant shall be required to
file promptly a copy of such election with the Company.
ARTICLE 9.
Annual
Incentive Awards, Long-Term Performance Unit Awards
and Performance Share Awards
9.1 Annual Incentive Awards.
(a) General Description. At the direction of
the Committee, Annual Incentive Awards may be made to
Participants and, unless determined otherwise by the Committee
at the date of grant, shall be paid in cash.
(b) Requirements for Covered Employees. For any
Covered Employees and to the extent the Committee intends to
comply with the requirements for performance-based Awards
described generally under Code section 162(m), the
Committee must certify, prior to payment of any such amounts,
that any applicable Performance Goals
and/or other
requirements have been satisfied and that such amounts are
consistent with the limits provided under Section 5.2.
(c) Payment of Annual Incentive Awards. Unless
the Committee determines otherwise at grant, in the event of a
Participants Separation from Service before the end of an
annual Performance Cycle due to death, Disability, or Approved
Retirement, such Participant, or his or her estate, shall be
eligible to receive a Annual Incentive Award based on
(a) in the case of death or Disability, full achievement of
the Participants Performance Goals for such Performance
Cycle, and (b) in the case of Approved Retirement, the
actual achievement of the Performance Goals for such Performance
Cycle, in each case prorated for the portion of the Performance
Cycle completed before the Participants termination of
employment. If a Participant terminates employment before
payment of an Annual Incentive Award is authorized by the
Committee for any reason other than death, Disability or
Approved Retirement, the Participant shall forfeit all rights to
such Annual Incentive Award unless otherwise determined by the
Committee. Payment of an Annual Incentive Award shall in all
events be made not later than March 15 of the year after the
year in which the Award is no longer subject to a substantial
risk of forfeiture.
(d) Individual Award Limitation. In any
one-year period, the Annual Incentive Award cannot be more than
$3,750,000.
9.2 Long-Term Performance Unit Awards.
(a) General Description. At the discretion of
the Committee, grants of Long-Term Performance Unit Awards may
be made to Participants.
(b) Requirements for Covered Employees. For any
Covered Employees and to the extent the Committee intends to
comply with the requirements for performance-based Awards
described generally under Code section 162(m), the
Committee must certify, prior to payment of any such amounts,
that any applicable Performance Goals
and/or other
requirements have been satisfied, and that such amounts paid are
consistent with the limits provided under Section 5.2.
Payment for performance-based Awards shall in all events be made
not later than March 15 of the year after the year in which the
Award is no longer subject to a substantial risk of forfeiture.
81
(c) Payment of Long-Term Performance Unit
Awards. Long-Term Performance Unit Awards shall be
payable in cash, Common Stock, or a combination of cash and
Common Stock at the discretion of the Committee. Unless the
Committee shall otherwise determine at the date of grant:
(i) Due to Death. In the event of a
Participants Separation from Service by reason of death
during the applicable Performance Cycle, the Participants
estate or beneficiaries will receive a one-time payment as soon
as practicable of such Long-Term Performance Unit Award,
calculated as if the target value or equivalent value for each
Unit had, in fact, been achieved, but in no event later than
March 15 of the year following the year of death.
(ii) Due to Disability. In the event of a
Participants Separation from Service by reason of
Disability during the applicable Performance Cycle, the
Participant (or the Participants estate or beneficiaries,
if the Participant subsequently dies) will receive a one-time
payment as soon as practicable of such Long-Term Performance
Unit Award, but in no event later than March 15 of the year
following the year of Disability, calculated as if the target
value or equivalent value for each Unit had, in fact, been
achieved.
(iii) Due to Approved Retirement. In the event
of a Participants Separation from Service by reason of
Approved Retirement during the applicable Performance Cycle, the
Participant (or the Participants estate or beneficiaries,
if the Participant subsequently dies) shall receive a payment
calculated in the following manner: (i) the number of
Long-Term Performance Units granted will be reduced by
multiplying the grant by a fraction, the numerator of which is
the number of full months in the Performance Cycle during which
the Participant was an active employee and the denominator of
which is the number of months in the Performance Cycle (with a
partial month worked shall be counted as a full month if the
Participant is an active employee for 15 days or more in
that month); and (ii) the resulting reduced number of
Long-Term Performance Units shall be considered vested and
payment made to the Participant in a one-time payment as soon as
practicable after the completion of the respective Performance
Cycle and the final valuation of such Units is determined, but
in no event later than March 15 of the year following the year
of Approved Retirement.
(iv) Due to Cause. In the event a
Participants employment is terminated by the Company or
any Subsidiary for Cause, any outstanding Long-Term Performance
Unit Awards shall be cancelled and the Committee may, consistent
with Section 4.5 of the Plan, require that such Participant
disgorge any profit, gain or other benefit received in respect
of the payment of any prior Long-Term Performance Unit Awards
received within a period of twelve (12) months prior to the
Participants termination of employment for Cause. For
purposes of this Section 9.2(c)(iv), in the event a
Participants employment is terminated by the Company or
any Subsidiary for Cause, the provisions of this
Section 9.2(c)(iv) will apply notwithstanding any assertion
(by the Participant or otherwise) of a termination of employment
for any other reason enumerated under this Section.
(v) Due to Resignation. In the event a
Participants employment ends as a result of such
Participants resignation from the Company or any
Subsidiary, any Long-Term Performance Units credited to such
Participant shall be forfeited upon the Participants
termination of employment.
(vi) Due to Any Other Reason. In the event of a
Participants Separation from Service by the Company or any
Subsidiary for any other reason during the applicable
Performance Cycle, the Participant (or the Participants
estate Participant (or the Participants estate or
beneficiaries, if the Participant subsequently dies) shall
receive a payment calculated in the following manner:
(i) the number of Long-Term Performance Units granted will
be reduced by multiplying the grant by a fraction, the numerator
of which is the number of full months in the Performance Cycle
during which the Participant was an active employee and the
denominator of which is the number of months in the Performance
Cycle (with a partial month worked shall be counted as a full
month if the Participant is an active employee for 15 days
or more in that month); and (ii) the resulting reduced
number of Long-Term Performance Units shall be considered vested
and payment made to the Participant of a one-time payment as
soon as practicable of such pro-rated Long-Term Performance Unit
Award, but in no event later than March 15 of the year following
the year of separation, calculated as if the target value or
equivalent value for each Unit had, in fact, been achieved.
(d) Individual Long-Term Performance Unit Award
Limitation. In any one-year period, the value of the
Long-Term Performance Units which may be awarded to a
Participant cannot exceed $5,000,000.
82
9.3 Performance Shares.
(a) General Description. At the discretion of
the Committee, grants of Performance Share Awards may be made to
Participants.
(b) Requirements for Covered Employees. For any
Covered Employees and to the extent the Committee intends to
comply with the requirements for performance-based Awards
described generally under Code section 162(m), the
Committee must certify, prior to payment of any such amounts,
that any applicable Performance Goals
and/or other
requirements have been satisfied, and that such amounts paid are
consistent with the limits provided under Section 5.2.
(c) Payment of Performance Share
Awards. Performance Share Awards shall be payable in
Common Stock. Unless the Committee shall otherwise determine at
the date of grant:
(i) Due to Death. In the event of a
Participants Separation from Service by reason of death
during the applicable Performance Cycle, the Participants
estate or beneficiaries will receive a one-time payment as soon
as practicable of such Performance Share Award, but in no event
later than March 15 of the year following the year of death,
calculated as if the target number of Performance Shares had, in
fact, been earned.
(ii) Due to Disability. In the event of a
Participants Separation from Service by reason of
Disability during the applicable Performance Cycle, the
Participant (or the Participants estate or beneficiaries,
if the Participant subsequently dies) will receive a one-time
payment as soon as practicable of such Performance Share Award,
but in no event later than March 15 of the year following the
year of Disability, calculated as if the target number of
Performance Shares had, in fact, been earned.
(iii) Due to Approved Retirement. In the event
of a Participants Separation from Service by reason of
Approved Retirement during the applicable Performance Cycle, the
Participant (or the Participants estate or beneficiaries,
if the Participant subsequently dies) shall receive a payment
calculated in the following manner: (i) the number of
Performance Shares granted will be reduced by multiplying the
grant by a fraction, the numerator of which is the number of
full months in the Performance Cycle during which the
Participant was an active employee and the denominator of which
is the number of months in the Performance Cycle (with a partial
month worked shall be counted as a full month if the Participant
is an active employee for 15 days or more in that month);
and (ii) the resulting reduced number of Performance Shares
shall be considered vested and payment made to the Participant
in a one-time payment as soon as practicable after the
completion of the respective Performance Cycle and the final
number of Performance Shares has been determined, but in no
event later than March 15 of the year following the year of
Approved Retirement.
(iv) Due to Cause. In the event a
Participants employment is terminated by the Company or
any Subsidiary for Cause, any outstanding Performance Share
Awards shall be cancelled and the Committee may, consistent with
Section 4.5 of the Plan, require that such Participant
disgorge any profit, gain or other benefit received in respect
of the payment of any prior Performance Share Awards received
within a period of twelve (12) months prior to the
Participants termination of employment for Cause. For
purposes of this Section 9.3(c)(iv), in the event a
Participants employment is terminated by the Company or
any Subsidiary for Cause, the provisions of this
Section 9.3(c)(iv) will apply notwithstanding any assertion
(by the Participant or otherwise) of a termination of employment
for any other reason enumerated under this Section.
(v) Due to Resignation. In the event a
Participants employment ends as a result of such
Participants resignation from the Company or any
Subsidiary, any Performance Share Awards credited to such
Participant shall be forfeited upon the Participants
termination of employment.
(vi) Due to Any Other Reason. In the event of a
Participants Separation from Service by the Company or any
Subsidiary for any other reason during the applicable
Performance Cycle, the Participant (or the Participants
estate or beneficiaries, if the Participant subsequently dies)
shall receive a payment calculated in the following manner:
(i) the number of Performance Shares granted will be
reduced by multiplying the grant by a fraction, the numerator of
which is the number of full months in the Performance Cycle
during which the Participant was an active employee and the
denominator of which is the number of months in the Performance
Cycle (with a partial month worked shall be counted as a full
month if the Participant is an active employee for 15 days
or more in that month); and (ii) the resulting reduced
number of Performance Shares shall be considered vested and
payment made to the Participant of a one-time payment as soon as
practicable of such pro-rated Performance Share Award, but in no
event later than March 15 of the year following the year of
separation, calculated as if the target number of Performance
Shares had, in fact, been earned.
83
ARTICLE 10.
10.1 Terms and Conditions of Non-Employee
Directors Awards. Unless otherwise determined by
the Committee at the time of grant and except as described
Sections 10.2 and 10.3 below, the provisions of this Plan,
where applicable, shall apply to Awards granted to Non-Employee
Directors.
10.2 Termination of Service for any Reason Other than
Death or Permanent Disability. In the event a
Non-Employee Director shall cease to serve the Company as a
director for any reason other than such Non-Employee
Directors death or Permanent Disability, each Award held
by such Non-Employee Director shall, to the extent rights under
the Awards have become vested at the time such Non-Employee
Director ceases to serve as a director, remain exercisable, in
whole or in part, by the Non-Employee Director, subject to prior
expiration according to its terms and other limitations imposed
by the Plan, for the remaining term of the Award. If the
Non-Employee Director dies after such cessation of service, the
Non-Employee Directors Awards shall be exercisable in
accordance with Section 6.6(a) hereof. If the Award is
subject to Section 409A of the Code, the period of exercise
shall in any event be restricted to the period permitted under
guidance issued by the Treasury Department.
10.3 Termination of Service for Death or Permanent
Disability. If a Non-Employee Director ceases to be a
director by reason of death or Permanent Disability, each Award
held by such Non-Employee Director shall immediately become
exercisable and shall remain exercisable, in whole or in part,
by (in the case of Permanent Disability) the Non-Employee
Director or the Non-Employee Directors guardian or
attorney-in-fact or (in the case of death) the personal
representative of the Non-Employee Directors estate or by
any person or persons who have acquired the Award directly from
the Non-Employee Director during the shorter of the following
periods: (i) the term of the Award, or (ii) a period
of two (2) years from the death or Permanent Disability of
such Non-Employee Director or (iii) if the Award is subject
to Section 409A of the Code, the period permitted for the
exercise of an award subject to Section 409A of the Code.
If a Non-Employee Director dies or a Permanent Disability occurs
during the extended exercise period following cessation of
service specified in Subsection 10.2 above, such Award may be
exercised any time within the longer of such extended period or
one (1) year after death or Permanent Disability, subject
to the prior expiration of the term of the Award. In the case of
any Award which is subject to Section 409A of the Code, in
no event will the exercise period permitted under the prior
sentence exceed the period permitted in compliance with such
section. For purposes of this Subsection 10.3, Permanent
Disability shall mean (a) in the case of an Award
which is not subject to Section 409A of the Code, a
determination by the Social Security Administration or any
similar successor agency that a Non-Employee Director is
permanently disabled, and the date on which a
Permanent Disability is deemed to have occurred shall be the
date on which such determination by such agency shall have been
made and (b) in the case of an Award which is subject to
Section 409A of the Code, a 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 months and which renders the individual incapable of
engaging in any substantial gainful employment.
10.4 Limitation on Awards to Non-Employee
Directors. Subject to the limit set forth in
section 5.1(a) on the number of shares of Common Stock that
may be issued in the aggregate under this Plan, the maximum
number of shares that may be issued pursuant to Awards to
Non-Employee Directors shall be 5,000,000.
ARTICLE 11.
Change of
Control
11.1 Accelerated Vesting and Payment of
Awards. Subject to the provisions of Section 11.3,
in the event of a Change of Control each Option and SAR then
outstanding shall be fully exercisable regardless of the
exercise schedule otherwise applicable to such Option
and/or SAR,
and the Restricted Period shall lapse as to each share of
Restricted Stock and each Restricted Unit then outstanding. In
connection with such a Change of Control, the Committee may, in
its discretion, provide that each Option, SAR, Restricted Stock
and/or
Restricted Unit shall, upon the occurrence of such Change of
Control, be cancelled in exchange for a payment per share/unit
(the Settlement Payment) in an amount based on the
Change of Control Price.
11.2 Long Term Performance Unit Awards and Performance
Share Awards. Subject to the provisions of
Section 11.3, in the event of a Change of Control,
(a) any outstanding Long Term Performance Unit Awards or
Performance Share Awards relating to Performance Cycles ending
prior to the Change of Control which have been earned but not
paid shall
84
become immediately payable, (b) all
then-in-progress
Performance Cycles for Long Term Performance Unit Awards or
Performance Share Awards that are outstanding shall end, and all
Participants shall be deemed to have earned an award equal to
the Participants target award opportunity for the
Performance Cycle in question, and (c) the Company shall
pay all such Long Term Performance Unit Awards and Performance
Share Awards as a Settlement Payment within thirty
(30) days of such Change of Control, based on the Change of
Control Price.
11.3 Alternative Awards. Notwithstanding
Section 11.1 or 11.2, no cancellation, acceleration of
exercisability, vesting, cash settlement or other payment shall
occur with respect to any Option, SAR, Restricted Stock,
Restricted Unit, Long-Term Performance Unit
and/or
Performance Share if the Committee reasonably determines in good
faith prior to the occurrence of a Change of Control that such
Option, SAR, Restricted Stock, Restricted Unit, Long-Term
Performance Unit
and/or
Performance Share shall be honored or assumed, or new rights
substituted therefore (such honored, assumed or substituted
award hereinafter called an Alternative Award), by a
Participants employer (or the parent or an affiliate of
such employer) immediately following the Change of Control;
provided that any such Alternative Award must:
(a) be based on stock that is traded on an established
securities market;
(b) provide such Participant with rights and entitlements
substantially equivalent to or better than the rights, terms and
conditions applicable under such Option, SAR, Restricted Stock,
Restricted Unit, Long-Term Performance Unit
and/or
Performance Share, including, but not limited to, an identical
or better exercise or vesting schedules;
(c) have substantially equivalent value to such Option,
SAR, Restricted Stock, Restricted Unit, Long-Term Performance
Unit and/or
Performance Share (determined at the time of the Change in
Control); and
(d) have terms and conditions which provide that in the
event that the Participants employment is involuntarily
terminated for any reason other than for Cause, all of such
Participants Options, SARs, Restricted Stock, Restricted
Units, Long-Term Performance Units
and/or
Performance Shares shall be deemed immediately and fully
exercisable
and/or all
restrictions shall lapse, and shall be settled for a payment per
each share of stock subject to the Alternative Award in cash, in
immediately transferable, publicly traded securities, or in a
combination thereof, in an amount equal to (i) the Fair
Market Value of such stock on the date of the Participants
termination (with respect to any Restricted Stock,
and/or
Restricted Units), (ii) the excess of the Fair Market Value
of such stock on the date of the Participants termination
over the corresponding exercise or base price per share, if any
(with respect to any Option
and/or
SARs), or (iii) the Participants target award
opportunity for the Performance Cycle in question (with respect
to any Long-Term Performance Units or Performance Shares).
ARTICLE 12.
Amendment,
Modification, and Termination of Plan
12.1 General. The Board may, at any time and
from time to time amend, modify, suspend, or terminate this
Plan, in whole or in part, without notice to or the consent of
any Participant or employee; provided, however, that any
amendment which would (i) increase the number of shares
available for issuance under the Plan, (ii) lower the
minimum exercise price at which an Option (or the base price at
which a SAR) may be granted, or (iii) change the individual
Award limits shall be subject to the approval of the
Companys shareholders. No amendment, modification or
termination of the Plan shall in any manner adversely affect any
Award theretofore granted under the Plan, without the consent of
the Participant, provided, however, that
(a) any change pursuant to, and in accordance with the
requirements of, Article 11;
(b) any acceleration of payments of amounts accrued under
the Plan by action of the Committee or by operation of the
Plans terms; or
(c) any decision by the Committee to limit participation
(or other features of the Plan) prospectively under the Plan
shall not be deemed to violate this provision.
Notwithstanding anything to the contrary herein, without the
prior approval of the Companys shareholders, and except as
provided in Section 5.4, Options or SARs issued under this
Plan will not be repriced, replaced, or regranted through
cancellation, or by lowering the option price of a previously
granted Option or SAR and no amendment of this Plan shall be
made without shareholder approval if shareholder approval is
required by law, regulation or stock exchange rule.
85
ARTICLE 13.
Miscellaneous
Provisions
13.1 Transferability of Awards. No Awards
granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution; provided that
the Committee may, in the Award agreement or otherwise, permit
transfers of Nonstatutory Stock Options with or without tandem
SARs, freestanding SARs, Restricted Stock and Restricted Units
to Family Members (including, without limitation, transfers
effected by a domestic relations order).
13.2 Treatment of Any Outstanding Rights or Features
Upon Participants Death. Any Awards, rights or
features remaining unexercised or unpaid at the
Participants death shall be paid to, or exercised by, the
Participants estate except where otherwise provided by
law, or when done in accordance with other methods (including a
beneficiary designation process) put in place by the Committee
or a duly appointed designee from time to time. Except as
otherwise provided herein, nothing in this Plan is intended or
may be construed to give any person other than Participants any
options, rights or remedies under this Plan.
13.3 Deferral of Payment. The Committee may, in
the Award agreement or otherwise, permit a Participant to elect,
upon such terms and conditions as the Committee may establish,
to defer receipt of shares of Common Stock that would otherwise
be issued upon exercise or vesting of an Award. Notwithstanding
anything else contained herein to the contrary, deferrals shall
not be permitted hereunder in a way that will result in the
Company or any Subsidiary being required to recognize a
financial accounting charge due to such deferral that is
substantially greater than the charge, if any, that was
associated with the underlying Award.
13.4 Coordination With Severance Plans. In the
event an Award is made to an individual who incurs a Qualifying
Separation, as that term is defined in the King Pharmaceuticals,
Inc. Executive Officers Severance Pay Plan or, as applicable,
the King Pharmaceuticals, Inc., Severance Pay Plan, at a time
when the Award is not vested or exercisable and would not
otherwise become vested and exercisable at the time of the
Qualifying Separation, then such Award may vest and become
exercisable as a result of a Separation from Service which
qualifies as any such Qualifying Separation.
13.5 Section 409A Compliance. To the
extent an Award is subject to Section 409A of the Code,
such Award shall be paid as provided in the Award Agreement on
the earliest to occur of (i) death, (ii) Disability,
(iii) Separation from Service with the Company and all of
its Subsidiaries, (iv) a Change of Control, or (v) a
fixed date as specified by the Committee in the applicable Award
Agreement. Payment of an Award subject to Section 409A of
the Code shall not be accelerated, except as provided in
regulations issued by the Secretary of the Treasury under
Section 409A of the Code.
In the event that an Award is granted to an individual who is a
specified employee for purposes of Section 409A
of the Code and who becomes eligible for compensation under an
Award as a result of a Separation from Service, then a
distribution to such individual shall in no event be made to
such specified employee for six (6) months after the date
of such Separation from Service.
The Company intends that the Plan and any Awards granted
hereunder be exempt from the application of Section 409A of
the Code or meet the requirements of paragraphs (2),
(3) and (4) of subsection (a) of
Section 409A of the Code ( and any successor provisions of
the Code) and the regulations and other guidance issued
thereunder (the Requirements), to the extent
applicable, and be operated in accordance with such Requirements
so that any compensation deferred under such Awards (and
applicable investment earnings) shall not be included in income
under Section 409A of the Code. Any ambiguities in the Plan
shall be construed to effect the intent as described in this
Section 13.4. If any provision of the Plan is found to be
in violation of the Requirements, then such provision shall be
deemed to be modified or restricted to the extent and in the
manner necessary to render such provision in conformity with the
Requirements, or shall be deemed excised from the Plan, and the
Plan shall be construed and enforced to the maximum extent
permitted by the Requirements as if such provision had been
originally incorporated in the Plan as so modified or
restricted, or as if such provision had not been originally
incorporated in the Plan, as the case may be.
13.6 Awards In Substitution for Awards Granted By Other
Companies. Awards may be granted under the Plan from
time to time in exchange for awards (including, but not limited
to, options, common stock, restricted stock, performance shares
or performance units) held by employees of other companies who
become Employees of the Company or of any Subsidiary as a result
of a merger or consolidation of the employing company with the
Company, or such Subsidiary, or the
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acquisition by the Company or a Subsidiary of all or a portion
of the assets of the employing company. Shares issued in
connection with such substitute Awards shall not reduce the
number of shares of Common Stock issuable under Section 5.1
of the Plan.
13.7 No Guarantee of Employment or
Participation. The existence of the Plan shall not be
deemed to constitute a contract of employment between the
Company or any Subsidiary and any Participant, nor shall it
constitute a right to remain in the employ of the Company or any
Subsidiary. The terms or existence of this Plan, as in effect at
any time or from time to time, or any Award granted under the
Plan, shall not interfere with or limit in any way the right of
the Company or any Subsidiary to terminate any
Participants employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company
or any Subsidiary. Each employee of the Company or any
Subsidiary remains at will. Except to the extent expressly
selected by the Committee to be a Participant, no person
(whether or not an Eligible Individual or a Participant) shall
at any time have a right to be selected for (or additional)
participation in the Plan, despite having previously
participated in an incentive or bonus plan of the Company or a
Subsidiary.
13.8 Tax Withholding. The Company or its
Subsidiaries shall have the right and power to deduct from all
payments or distributions hereunder, or require a Participant to
remit to the Company promptly upon notification of the amount
due, an amount (which may include shares of Common Stock) to
satisfy any federal, state, local or foreign taxes or other
obligations required by law to be withheld with respect thereto
with respect to any Award. The Company may defer payments of
cash or issuance or delivery of Common Stock until such
withholding requirements are satisfied. The Committee may, in
its discretion, permit a Participant to elect, subject to such
conditions as the Committee shall impose, (a) to have
shares of Common Stock otherwise issuable under the Plan
withheld by the Company or (b) to deliver to the Company
previously acquired shares of Common Stock (through actual
tender or attestation), in either case for the greatest number
of whole shares having a Fair Market Value on the date
immediately preceding the date of exercise not in excess of the
amount required to satisfy the withholding tax obligations.
13.9 No Limitation on Compensation; Scope of
Liabilities. Nothing in the Plan shall be construed to
limit the right of the Company to establish other plans if and
to the extent permitted by applicable law. The liability of the
Company or its Subsidiaries under this Plan is limited to the
obligations expressly set forth in the Plan, and no term or
provision of this Plan may be construed to impose any further or
additional duties, obligations, or costs on the Company or its
Subsidiaries or the Committee not expressly set forth in the
Plan.
13.10 Requirements of Law. The granting of
Awards and the issuance of shares of Common Stock shall be
subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national
securities exchanges as may be required.
13.11 Term of Plan. The Plan shall be effective
upon the Effective Date. The Plan shall terminate on the earlier
of (a) the termination of the Plan pursuant to
Article 12, (b) when no more shares are available for
issuance of Awards under the Plan, or (c) ten
(10) years from the Effective Date, at which time no
further grants may be made under the Plan.
13.12 Governing Law. The Plan, and all
agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Tennessee, without regard
to principles of conflict of laws.
13.13 Securities Law Compliance. Instruments
evidencing Awards may contain such other provisions, not
inconsistent with the Plan, as the Committee deems advisable,
including a requirement that the Participant represent to the
Company in writing, when an Award is granted or when he receives
shares with respect to such Award (or at such other time as the
Committee deems appropriate) that he is accepting such Award, or
receiving or acquiring such shares (unless they are then covered
by a Securities Act of 1933 registration statement), for his own
account for investment only and with no present intention to
transfer, sell or otherwise dispose of such shares except such
disposition by a legal representative as shall be required by
will or the laws of any jurisdiction in winding up the estate of
the Participant. Such shares shall be transferable, or may be
sold or otherwise disposed of only if the proposed transfer,
sale or other disposition shall be permissible pursuant to the
Plan and if, in the opinion of counsel satisfactory to the
Company, such transfer, sale or other disposition at such time
will be in compliance with applicable securities laws.
87
13.14 No Impact On Benefits. Except as may
otherwise be specifically provided for under any employee
benefit plan, policy or program provision to the contrary,
Awards shall not be treated as compensation for purposes of
calculating a Participants right under any such plan,
policy or program.
13.15 No Constraint on Corporate Action. Except
as provided in Article 12, nothing contained in this Plan
shall be construed to prevent the Company, or any of its
Subsidiaries, from taking any corporate action (including, but
not limited to, the Companys right or power to make
adjustments, reclassifications, reorganizations or changes of
its capital or business structure, or to merge or consolidate,
or dissolve, liquidate, sell, or transfer all or any part of its
business or assets) which is deemed by it to be appropriate, or
in its best interest, whether or not such action would have an
adverse effect on this Plan, or any Awards made under this Plan.
No employee, beneficiary, or other person, shall have any claim
against the Company or any Subsidiary, as a result of any such
action.
13.16 Captions. The headings and captions
appearing herein are inserted only as a matter of convenience.
They do not define, limit, construe, or describe the scope or
intent of the provisions of the Plan.
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*** Exercise Your Right to Vote ***
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to Be Held on May 26, 2010
KING PHARMACEUTICALS, INC.
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Meeting Information |
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Meeting Type: Annual Meeting |
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For holders as of: March 30, 2010 |
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Date: May 26, 2010 Time: 9:00 AM EDT |
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Location:
The Umstead Hotel 100 Woodland Pond Cary, North Carolina 27513
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You are receiving this communication because you hold
shares in the above named company.
This is not a ballot. You cannot use this notice to vote these shares. This communication presents
only an overview of the more complete proxy materials that are available to you on the Internet.
You may view the proxy materials online at www.proxyvote.com or easily request a paper copy
(see reverse side).
We encourage you to access and review all of the important information contained in the proxy
materials before voting.
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See the reverse side of this notice to obtain
proxy materials and voting instructions.
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How to Access the Proxy Materials
Proxy Materials Available
to VIEW or RECEIVE:
1. Notice & Proxy Statement
2. Annual Report
How to View Online:
Have the 12-Digit Control Number available (located on the following page)
and visit:
www.proxyvote.com.
How to Request and Receive a PAPER or E-MAIL Copy:
If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO
charge for requesting a copy. Please choose one of the following methods to make your request:
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1) BY INTERNET:
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www.proxyvote.com |
2) BY TELEPHONE:
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1-800-579-1639 |
3) BY E-MAIL*:
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sendmaterial@proxyvote.com |
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If requesting materials by e-mail, please send a blank e-mail with the 12-Digit Control
Number (located on the following page) in the subject line. |
Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to
your investment advisor. Please make the request as instructed above on or before May 12, 2010 to facilitate timely delivery.
Please Choose One of the Following Voting Methods
Vote In Person:
Many shareholder meetings have attendance requirements including, but not
limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please
check the meeting materials for any special requirements for meeting attendance. At the meeting you
will need to request a ballot to vote these shares.
Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the 12-Digit
Control Number available and follow the instructions.
Vote By Mail:
You can vote by mail by requesting a paper copy of the materials, which will include
a proxy card.
The Board of Directors recommends that you
vote FOR the following:
Nominees
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Kevin S Crutchfield |
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Earnest W Deavenport Jr |
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Elizabeth M Greetham |
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Philip A Incarnati |
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Gregory D Jordan PhD |
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Brian A Markison |
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R Charles Moyer PhD |
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D Gregory Rooker |
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Derace L Schaffer MD |
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Ted G Wood |
The Board of Directors recommends you vote FOR the following proposal(s):
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Approval of a proposed amendment to the companys Third
Amended and Restated Charter providing for a majority voting standard in uncontested elections of directors and eliminating unnecessary provisions related to our previously classified Board of Directors.
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Reapproval of the performance goals listed within the companys Incentive Plan, which originally were approved by our shareholders in 2005.
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Ratification of the appointment of PricewaterhouseCoopers LLP as the companys independent registered public accounting firm for the fiscal year ending December 31, 2010.
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The Board of Directors recommends you vote AGAINST the following proposal(s):
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Approval of a non-binding
shareholder proposal requesting that the companys Board of Directors
take steps to eliminate supermajority voting provisions applicable to shareholders.
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THIS SPACE RESERVED FOR SIGNATURES IF APPLICABLE
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VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for
electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone
to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided or return if to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: x |
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH
AND RETURN THIS PORTION
ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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For All |
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Withhold All |
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For All Except |
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To withhold authority to vote for any individual nominee(s),
mark For All Except and write the number(s) of the nominee(s) on the line below.
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The Board of Directors recommends that you vote FOR the following: |
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Election of Directors
Nominees |
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01 Kevin S Crutchfield |
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02 Earnest W Deavenport Jr |
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03 Elizabeth M Greetham |
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04 Philip A Incarnati |
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05 Gregory D Jordan PhD |
06 Brian A Markison |
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07 R Charles Moyer PhD |
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08 D Greg Rooker |
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09 Derace L Schaffer MD |
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10 Ted G Wood |
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The Board of Directors recommends you vote FOR the following proposal(s): |
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Abstain |
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Approval of a proposed amendment to the companys Third Amended and Restated Charter providing for
a majority voting standard in uncontested
elections of directors and eliminating unnecessary provisions related to our previously classified Board of Directors. |
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Reapproval of the performance goals listed within the companys Incentive Plan, which
originally were approved by our shareholders in 2005. |
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Ratification of the appointment of PricewaterhouseCoopers LLP as the companys
independent registered public accounting firm for the fiscal year
ending December 31, 2010. |
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The Board of Directors recommends you vote AGAINST the following proposal(s): |
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Abstain |
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If properly presented
at the meeting, approval of a non-binding shareholder proposal
requesting that the companys Board of Directors take steps to
eliminate supermajority voting provisions applicable to shareholders. |
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For address change/comments, mark here.
(see reverse for instructions) |
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Investor Address Line 1
Investor Address Line 2
Investor Address Line 3
Investor Address Line 4
Investor Address Line 5
John Sample
1234 ANYWHERE STREET
ANY CITY, ON A1A 1A1 |
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Yes |
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No |
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Please indicate if you plan to attend this meeting |
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney,
executor, administrator, or other fiduciary, please give full title as such.
Joint owners should each sign personally. All holders must sign. If a corporation or
partnership, please sign in full corporate or partnership name, by authorized officer. |
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Signature [PLEASE SIGN WITHIN BOX] |
Date |
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Signature (Joint Owners) |
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Driving Directions:
If using a GPS Navigation System, please use the following address: 5 SAS Campus
Drive, Cary, North Carolina, 27513
From Durhant or points West, including RDU Airport, take I-40 East toward Raleigh. Take
Exit 287, then turn right onto North Harrison Avenue At the first
traffic light, turn left onto SAS Campus Drive. The Umstead Hotel and
Spa, at 100 Woodland Pond Drive, is the first road on the left.
From
Raleigh or Points East, take I-40 West toward Durham/Chapel Hill.
Take Exit 287, then turn left onto North Harrison Avenue. At the
second traffic light, turn left onto SAS Campus Drive. The Umstead
Hotel and Spa, at 100 Woodland Pond Drive, is the first road on the left.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice & Proxy Statement, Annual Report is/ are available at www.proxyvote.com.
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ANNUAL MEETING OF SHAREHOLDERS OF KING PHARMACEUTICALS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
2010 ANNUAL MEETING OF SHAREHOLDERS
May 26, 2010 |
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The undersigned appoints each of James W. Elrod and William L.
Phillips Ill, or either of them, with full power of substitution and revocation as Proxy, to vote all shares of stock standing in my name on the books of King Pharmaceuticals, Inc. (the Company) at the close of business on March 30, 2010, which the undersigned would be entitled to vote if personally present at the Annual Meeting of
Shareholders of the Company to be hold at The Umstead Hotel, 100 Woodland Pond, Cary,
North Carolina, on Wednesday, May 26, 2010, at 9:00 a.m., Eastern Daylight Time, and at any and all adjournments, upon the matters set forth in the notice of the meeting. The Proxy is further authorized to vote according to the recommendation of management as to any other matters which may come before the meeting. At the time of preparation of the Proxy Statement, the Board of Directors knows of no business to come before
the meeting other than that referred to in the Proxy Statement.
The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting of Shareholders of King Pharmaceuticals, Inc. and the related Proxy Statement.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ON THE REVERSE SIDE AND WHEN NO INSTRUCTIONS ARE GIVEN, WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD AS DESCRIBED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING AND PROXY STATEMENT AND ON THIS PROXY.
Address change / comments:
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side