Exhibit 10.47
EMPLOYMENT AGREEMENT DATED MARCH 31,
2008 BETWEEN
JOHN KERNAGHAN AND PHARMERICA
CORPORATION
THIS AGREEMENT by and between
PharMerica Corporation, including its subsidiaries and affiliates
(collectively “PharMerica” or “the
Company”), and John Kernaghan (the “Executive”),
is effective as of March 31, 2008, the Executive’s first
day of employment with PharMerica (the “Employment
Date”);
WHEREAS, PharMerica is engaged in
hospital and long-term care institutional pharmacy services, and
PharMerica expects in the future to pursue and engage in additional
related lines of business; and
WHEREAS, the Executive understands
that PharMerica’s business and goodwill depend on the
preservation of its confidential information, trade secrets,
workforce and customer relationships;
NOW, THEREFORE, IT IS HEREBY AGREED
AS FOLLOWS:
1. Employment Period . The
Company shall employ the Executive, either directly or through a
Subsidiary, and the Executive shall serve the Company or any such
Subsidiary, on the terms and conditions set forth in this
Agreement, beginning on the Employment Date and ending either when
employment ceases as provided below in Section 4, or three
(3) years after the Employment Date, whichever date occurs
first (the “Employment Period”).
2. Position and Duties
.
(a) During the Employment Period,
the Executive shall be employed as the Vice President of
Information Services of the Company, subject to such changes in
title as may be proposed by the Board or the Chief Executive
Officer and consented to by the Executive. The Executive shall
report to the Executive designated by the Chief Executive Officer
and shall perform such duties for the Company as are related
typically to the office of Vice President of Information Services,
in the manner reasonably directed by his supervisor, in his
supervisor's discretion.
(b) During the Employment Period,
but excluding any periods of vacation and absence due to
intermittent illness to which the Executive is entitled, and any
services on corporate, civic or charitable boards or committees,
lectures, speaking engagements or teaching engagements that are
approved by the Executive’s direct supervisor and that do not
significantly interfere with the performance of the
Executive’s responsibilities to the Company or violating the
provisions of Sections 8, 9, 10, and 11, the Executive shall devote
his full time and attention during normal business hours to the
business and affairs of the Company and the Executive shall use
reasonable efforts to carry out all duties and responsibilities
assigned to him faithfully and efficiently.
3. Compensation .
(a) Base Salary . During the
Employment Period, the Executive shall receive an annual base
salary of $225,000, payable in accordance with the regular payroll
practices of the Company. The Executive’s base salary shall
be reviewed annually by the Chief Executive Officer of the Company,
in accordance with the Company’s standard practices for
executives generally, and may be increased, but not decreased, as
determined by the Chief Executive Officer or the Company's
Compensation Committee, or their authorized designees, in their
sole discretion.
(b) Annual Bonus and Incentive
Plans; Other Benefits . During the Employment Period:
(i) the Executive shall be entitled to participate in any
short-term programs established and/or maintained by the Company
for its senior level executives generally; (ii) the Executive
shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs of the Company
to at least the same extent as other vice presidents of the
Company; (iii) the Executive and/or the Executive’s
family, as the case may be, shall be eligible for participation in,
and shall receive all
benefits under, all welfare benefit plans
provided by the Company to at least the same extent as other vice
presidents of the Company; (iv) the Executive shall be
entitled to an executive level relocation assistance agreement, up
to a maximum value of $100,000 (eligible for 35% gross up, as
applicable), subject to pro-rated reimbursement should the
Executive leave the Company voluntarily prior to 24 months from his
Employment Date; and (v) the Executive shall be entitled to,
and the Company shall provide the Executive with 20 days of paid
time off during each calendar year to use at the Executive’s
discretion in accordance with the Company’s paid time off
policy. Any bonus for fiscal year 2008 will be pro-rated based on
the Executive’s Employment Date. The Executive shall not be
eligible for the Company's long-term incentive program.
(c) Expenses . During the
Employment Period, the Executive shall be entitled to receive
advancement or prompt reimbursement for all reasonable expenses
incurred or anticipated to be incurred by the Executive in carrying
out the Executive’s duties under this Agreement, provided
that the Executive complies with the generally applicable policies,
practices and procedures of the Company for submission of expense
reports, receipts, or similar documentation of such
expenses.
(d) Stock Award . The
Executive will be granted a one-time stock award in 2008, comprised
of 25,000 stock options and 25,000 restricted shares. The stock
options will vest at a rate of 25% per year from the grant
date, with 100% vested in four (4) years from the grant date;
the restricted shares will vest three (3) years from the grant
date. The grant date will be the Employment Date. Because the
Executive has agreed to a three (3) year Employment Period,
which is less than the four (4) year vesting period for this
stock award, as long as the Executive remains with the Company for
the full three (3) year Employment Period, he will not have
forfeited the stock options, and they will nevertheless vest four
(4) years from the grant date. If the Executive’s
employment ceases before the end of the three (3) years for
any of the reasons provided below in Section 4, then the
Company’s obligations regarding the stock award as provided
below in Section 5 will apply. Equity grants are made in
amounts and at such times as designated by the Board of
Directors.
4. Termination of Employment
.
(a) Death or Disability . The
Executive’s employment and the Employment Period shall
terminate automatically upon the Executive’s death or long
term Disability during the Employment Period.
“Disability” means a condition entitling the Executive
to benefits under the Company’s Long Term Disability Plan,
policy or arrangement.
(b) By the Company . The
Company may terminate the Executive’s employment under this
Agreement during the Employment Period for Cause or without Cause.
“Cause” means
(i) the continued failure by the
Executive to substantially perform his duties as contemplated by
this Agreement (other than any such failure resulting from his
incapacity due to physical or mental illness or injury or any such
actual or anticipated failure after the issuance by the Executive
of a Notice of Termination for Good Reason) over a period of not
less than thirty days after a demand for substantial performance is
delivered to the Executive by the Board or by the Chief Executive
Officer of the Company, which demand identifies the manner in which
it is believed that the Executive has not substantially performed
his duties;
(ii) the willful misconduct of the
Executive materially and demonstrably injurious to the Company
(including, without limitation, any breach by the Executive of
Sections 8, 9, 10, or 11 of this Agreement); provided that no act
or failure to act on the Executive’s part will be considered
willful if done, or omitted to be done, by him in good faith and
with reasonable belief that his action or omission was in the best
interest of the Company;
(iii) the commission by or
indictment of the Executive for a misdemeanor, which, as determined
in good faith by the Board, constitutes a crime of moral turpitude
and gives rise to material harm to the Company or to any subsidiary
or affiliate of the Company;
(iv) the commission by or indictment
of the Executive for a felony (including, without limitation, any
felony constituting a crime of moral turpitude); or
(v) material breach by the Executive
of the Executive’s obligations under this
Agreement.
(c) By the Executive . The
Executive may terminate employment under this Agreement for Good
Reason or without Good Reason. “Good Reason”
means:
(i) any reduction in the
Executive’s Base Salary or incentive bonus opportunity, as
provided in Section 3 above; or
(ii) material failure by the Company
to comply with any provision of Sections 2 and 3 of this Agreement,
other than an isolated, insubstantial or inadvertent failure that
is not taken in bad faith and is remedied by the Company within 30
days after receipt of written notice thereof from the
Executive.
Notwithstanding the
foregoing, “Good Reason” for purposes of
Section 4(c)(i) shall not include a reduction in Base Salary
or incentive bonus opportunity if such reduction is coincident with
a reduction applicable to all members of the senior management
team. A termination of employment by the Executive for Good Reason
shall be effectuated by giving the Company written notice
(“Notice of Termination for Good Reason”) of the
termination, setting forth in reasonable detail the specific
conduct that constitutes Good Reason and the specific provision(s)
of this Agreement on which the Executive relies. Such Notice of
Termination for Good Reason must be received by the Company no
later than the 60 th day after the event, or last in
a series of events, that gives rise to Good Reason. The Company
shall have 20 days to remedy the conduct set forth in the Notice of
Termination for Good Reason. A termination of employment by the
Executive for Good Reason shall be effective on the 60
th
business day
following the date when the Notice of Termination for Good Reason
is given, unless the conduct set forth in the notice is remedied by
the Company within the 20-day period. A termination of the
Executive’s employment by the Executive without Good Reason
shall be effected by giving the Company at least 30 days’
advance written notice of the termination.
(d) Date of Termination . The
“Date of Termination” means the date of the
Executive’s death, the date of the Executive’s
Disability, the date the termination of the Executive’s
employment under this Agreement by the Company for Cause or without
Cause or by the Executive for Good Reason or without Good Reason,
as the case may be, is effective. The Employment Period shall end
on the Date of Termination.
5. Obligations of the Company
upon Termination .
(a) By the Company Other Than for
Cause; or By the Executive for Good Reason . If, during the
Employment Period, the Company terminates the Executive’s
employment under this Agreement (other than for Cause) or the
Executive terminates employment under this Agreement for Good
Reason:
(1) the Executive shall be entitled
to (i) continued payment for twelve (12) months after the
Date of Termination of the Executive’s current base salary
(as in effect on the Date of Termination), and (ii) a bonus
equal to the average of the annual bonuses earned by the Executive
over the three complete years (or if less than three years, the
average bonus earned during such shorter period) preceding the Date
of Termination (that is, not including the bonus year that includes
the Date of Termination) to be paid on the first business day at
the conclusion of the twelve month period after the Date of
Termination; and
(2) for the twelve (12) month
period following the Date of Termination, the Executive will
receive waiver of the applicable premium otherwise payable for
COBRA continuation coverage for the Executive, his spouse and
eligible dependents (to the extent
covered on the Date of Termination)
for health, prescription, dental and vision benefits; provided,
however, that to the extent COBRA continuation coverage eligibility
expires (unless such expiration is due to eligibility for other
group health insurance or Medicare) before the end of such twelve
month period, the Executive will receive payment, on an after-tax
basis, of an amount equal to the premium the Company would have
otherwise waived for COBRA coverage. The obligations of the Company
to provide benefits under this Section 5(a)(2) shall terminate
on the date of occurrence of the first to occur of any of the
following, if any of the following should occur prior to the end of
the twelve (12) month period: (i) the date of
commencement of eligibility of the Executive under the group health
plan of any other employer or (ii) the date of commencement of
eligibility of the Executive for Medicare benefits.
In addition, the Executive shall be
entitled to receive executive level outplacement assistance under
any outplacement assistance program then being maintained by the
Company in accordance with the terms of any such program. The
Executive shall also become vested in any outstanding options,
restricted stock or other equity incentive awards only to the
extent provided for under the terms governing such equity incentive
award. The Company shall also pay, or cause to be paid, to the
Executive, in a lump sum in cash within 30 days after the Date of
Termination (or, in the case of the pro-rated Annual Bonus Amount,
at the time such bonus would otherwise be paid), the
Executive’s accrued but unpaid cash compensation (the
“Accrued Obligations”), which shall include but not be
limited to, (W) the Executive’s base salary through the
Date of Termination that has not yet been paid (X) an amount
representing a 100% target bonus for the Executive’s salary
grade for the year of termination, multiplied by a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is
365 (the “Annual Bonus Amount”), (Y) any accrued
but unpaid vacation pay, and (Z) similar unpaid items that
have accrued and as to which the Executive has become entitled as
of the Date of Termination, including declared but unpaid bonuses
and unreimbursed employee business expenses; provided, however,
that the Company’s obligation to make any payments, or cause
any payments to be made, under this paragraph (a) to the
extent any such payment shall not have accrued as of the day before
the Date of Termination shall also be conditioned upon the
Executive’s execution, and non-revocation, of a written
release, substantially in the form attached hereto as Exhibit
1 , of any and all claims against the Company and all related
parties with respect to all matters arising out of the
Executive’s employment under this Agreement or the
termination thereof (other than any entitlements under the terms of
this Agreement to indemnification or under any other plans or
programs of the Company in which the Executive participated and
under which the Executive has accrued and is due a
benefit).
If any payment, compensation or
other benefit provided to the Executive in connection with his
employment termination is determined, in whole or in part, to
constitute “nonqualified deferred compensation” within
the meaning of Section 409A of the U.S. Tax Code (the
“Code”) and the Executive is a specified employee as
defined in Section 409A(a)(2)(B)(i) and Income Tax Regulations
under Section 409A, no part of such payments shall be paid
before the day that is six (6) months plus one (1) day
after the Date of Termination (the “New Payment Date”).
The aggregate of any payments that otherwise would have been paid
to the Executive during the period between the termination date and
the New Payment Date shall be paid to the Executive, without
interest, in a lump sum on such New Payment Date. Thereafter, any
payments that remain outstanding as of the day immediately
following the New Payment Date shall be paid without delay over the
time period originally scheduled, in accordance with the terms of
this Agreement.
(b) Death or Disability . If
the Executive’s employment is terminated by reason of the
Executive’s death or Disability during the Employment Period,
the Company shall pay the Accrued Obligations to the Executive or
the Executive’s estate or legal representative, as
applicable, in a lump sum in cash within 30 days after the Date of
Termination. If the Executive's employment is terminated by reason
of the Executive's death, the Executive shall also become vested in
any outstanding options, restricted stock or other equity incentive
awards. If the Executive's employment is terminated by reason of
the Executive's death or Disability, the Company shall have no
further obligations under this Agreement or otherwise to or with
respect to the Executive other than for any entitlements under the
terms of any other plans or programs of the Company in which the
Executive participated and under which the Executive has become
entitled to a benefit.
(c) By the Company for Cause; By
the Executive Other than for Good Reason . If the
Executive’s employment is terminated by the Company for Cause
during the Employment Period, or the Executive voluntarily
terminates employment during the Employment Period, other than for
Good Reason, the Company shall pay the Executive, or shall cause
the Executive to be paid, the Executive’s base salary through
the Date of Termination that has not been paid and the amount of
any declared but unpaid bonuses, accrued but unpaid vacation pay,
and unreimbursed employee business expenses, and the Company shall
have no further obligations under this Agreement or otherwise to or
with respect to the Executive other than for any entitlements under
the terms of any other plans or programs of the Company in which
the Executive participated and under which the Executive has become
entitled to a benefit.
(d) Termination Pursuant to a
Change of Control . If there is a Change of Control, as defined
in Section 5(d)(i) below, during the Employment Period, the
provisions of this Section 5(d) shall apply and shall continue
to apply throughout the remainder of Employment Period. If, within
one (1) year following a Change of Control, the
Executive’s employment is terminated by the Company or the
Executive following the occurrence of any of the events listed in
Section 5(d)(ii) below or if the Executive’s employment
is terminated without cause (in accordance with Section 5(a)
above), the Company shall pay to the Executive (or the
Executive’s estate, if applicable) the payments described
under Section 5(a) and the Executive shall become vested in
any outstanding options, restricted stock, or other equity
incentive award; provided that the Company’s obligation to
make any payment, or to permit any vesting of outstanding options,
restricted stock, or other equity incentive award as described
above, shall be conditioned upon the Executive’s execution,
and non-revocation, of a written release, substantially in the form
attached hereto as Exhibit 1 .
(i) Change of Control shall mean the
occurrence of one or more of the following events:
(A) any “person” (as
such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”))
becomes a “beneficial owner” (as such term is defined
in Rule 13d-3 promulgated under the Exchange Act) (other than the
Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation owned,
directly or indirectly, by the stockholders of the Company, in
substantially the same proportions as their ownership of stock of
the Company), directly or indirectly, of securities of the Company,
representing forty percent (40%) or more of the combined
voting power of the Company’s then outstanding securities;
or
(B) persons who, as of the Effective
Date, constituted the Company’s Board of Directors (the
“Incumbent Board”) cease for any reason including,
without limitation, as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of
the Board of Directors, provided that any person becoming a
director of the Company subsequent to the Effective Date whose
election was approved by at least a majority of the directors then
comprising the Incumbent Board shall, for purposes of this
Section 5(d), be considered a member of the Incumbent Board;
or
(C) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation or other entity, other than (1) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than forty
percent (40%) of the combined voting
power of the voting securities of
the Company or such surviving entity outstanding immediately after
such merger or consolidation or (2) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no “person” (as hereinabove
defined) acquires more than forty percent (40%) of the
combined voting power of the Company’s then outstanding
securities; or
(D) the stockholders of the Company
approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.
(ii) The events referred to in
Section 5(d) above shall be as follows:
(A) a reduction of the
Executive’s salary other than a reduction that (1) is
based on the Company’s financial performance or (2) is
similar to the reduction made to the salaries provided to all or
most other vice presidents of the Company; or
(B) a significant change in the
Executive’s responsibilities and/or duties which constitutes,
when compared to the Executive’s responsibilities and/or
duties before the Change of Control, a demotion; or
(C) a material loss of title or
office; or
(D) the relocation of the offices at
which the Executive is principally employed as of the Change of
Control to a location more than fifty (50) miles from such
offices, which relocation is not approved by the
Executive.
The Executive shall provide the
Company with reasonable notice and an opportunity to cure any of
the events listed in Section 5(d)(ii) and shall not be
entitled to compensation pursuant to this Section 5(d) unless
the Company fails to cure within a reasonable period.
(e) Treatment of Payments Subject
to Section 280G . It is the understanding of the Executive
and of the Company that certain payments by the Company to or for
the benefit of the Executive under this Agreement or any other
agreement or plan, if any, pursuant to which the Executive is
entitled to receive payments or benefits may be subject to the
provisions of Section 280G of the Code or any like statutory
or regulatory provision relating to parachute payments as such term
is defined in section 280G(b)(2) of the Code (a "Parachute
Payment"). In general, under Section 280G, a Parachute Payment
is a compensatory payment (including the accelerated vesting of
compensatory stock options made upon the occurrence of a change in
control of the Company) to the extent that the payment exceeds
three times the Executive's annual compensation.
(i) Reduction of Minimal
Parachute Payment . Notwithstanding any other provision of this
Agreement or any such agreement or plan, the a
