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Exhibit
10.21
EMPLOYMENT
AGREEMENT
THIS AGREEMENT by and between
Safari Holding Corporation, a Delaware corporation (hereinafter the
“Company”), and Robert McKay (the
“Executive”).
WHEREAS, the Company intends
to engage in the institutions pharmacy business as PharMerica
Corporation;
WHEREAS, the Board of
Directors of the Company (the “Board”), upon the
recommendation of the Compensation and Succession Planning
Committee of the Board (the “Committee”), has
determined that it is in the best interests of the Company and its
shareholders to employ the Executive, as the Senior Vice President
of Sales and Marketing of the Company (and Executive shall for all
purposes be deemed a “Senior Executive” of Company),
and the Executive desires to serve in that capacity, effective as
of the date of this Agreement;
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 earlier of the first day of business
operations of the Company as PharMerica Corporation
(“Closing”) or July 31, 2007 (the
“Employment Date”) and shall continue through the end
of the Term. The Term shall commence on the Employment Date and
shall end on December 31, 2011; provided, however, that the
Term shall thereafter be automatically extended for unlimited
one-year periods unless, at least 120 days before the then
scheduled expiration Term, Executive shall notify the Company or
the Company shall notify Executive that the Term shall not so
extend. Notwithstanding the foregoing, the Term may be earlier
terminated in accordance with the provisions of Section 4
below.
2. Position and
Duties.
(a) During the Employment
Period, the Executive shall be employed as the Senior Vice
President of Sales and Marketing 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 Chief Executive Officer of the Company and
shall perform such duties for the Company as are related typically
to the office of Senior Vice President of Sales and Marketing, in
the manner reasonably directed by the Chief Executive Officer of
the Company, in his reasonable 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, which approval
will not be unreasonably withheld or delayed, and that do not
significantly interfere with the performance of the
Executive’s responsibilities to the Company or violate the
provisions of Section 8, 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.
(c) Executive’s
principal place of employment and Executive’s office shall be
at the Company’s headquarters in Louisville,
Kentucky.
3. Compensation.
(a) Base Salary. During the
Employment Period, the Executive shall receive an annual Base
Salary of $250,000, payable in accordance with the regular payroll
practices of the Company. The Executive’s base salary shall
be reviewed annually by the Committee and/or 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 Committee, in its sole
discretion, or by any person or persons to whom the Committee has
delegated such authority.
(a) Annual Bonus and
Incentive Plans; Other Benefits. During the Employment Period:
(i) the Executive shall be entitled to participate in all
short-term and long-term incentive programs established and/or
maintained by the Company for Senior Executives as determined by
the Compensation Committee of the Board (“Compensation
Committee”) (and without limiting the generality of the
foregoing the Executive shall participate in the Annual Incentive
Plan with a target of 50% of Base Salary and a maximum bonus of
125% of target as described in the offer letter of June 6,
2007; the bonus for 2007 being pro-rated), such participation to be
on a basis no less favorable to Executive than to other Senior
Executives of Company; (ii) the Executive shall receive for
2008 a bonus representing at least fifty percent (50%) of his
Base Salary; (iii) 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 senior executives of the Company;
(iv) 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, practices,
policies and programs provided by the Company to at least the same
extent as, and on terms no less favorable than, other Senior
Executives of the Company; and (v) the Executive shall be
entitled to, and the Company shall provide the Executive with 4
weeks of paid vacation during each calendar year pursuant to the
Company’s vacation policy.
(b) 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.
(c) Signing Bonus. As soon as
practical after the execution of this Agreement Executive will be
paid a one-time cash bonus of $75,000.
(d) Relocation Expenses.
Company will pay all reasonable and customary relocation expenses
incurred by Executive in connection with Executive’s
relocation from Rhode Island to the Louisville area. Such
reimbursed expenses will include packing and moving of the
Executive’s and his family’s personal items. Company
will pay all reasonable costs for travel, food and for up to ten
weeks of temporary accommodations for Executive until he relocates
to Louisville, Kentucky on or before August 1, 2008. Company
will provide Executive with a full gross-up for applicable taxes,
if any, payable in connection with the payment of such temporary
living and relocation expenses.
(e) Founder’s
Grant.
(1) Stock Options.
(i) Effective on the fifth
trading day following the Closing (the “Grant Date”)
the Company will grant to the Executive Founder’s Grant of
stock options having a value of $487,500. Value of options to be
based on Black-Scholes option pricing model in effect at the time
as approved by the Compensation Committee.
(ii) Other Terms and
Conditions. The award agreement governing the non-qualified stock
option grant referenced in Section 3(g)(1)(i) shall include
the following terms and conditions.
A. Vesting. The option shall
vest, and become exercisable, with respect to 25% of the securities
subject to it on each of the first, second, third and fourth
anniversary of the grant of the stock options but in each case no
later than August 31 in each of 2008, 2009, 2010 and 2011 (and
thus be fully vested, and fully exercisable, no later than
August 31, 2011), subject to Executive’s continued
employment with the Company on the applicable vesting date and to
the other provisions of this Employment Agreement.
B. Exercise. Executive may
exercise the option, in whole or in part and to the extent it is
then exercisable, by making payment of the aggregate option
exercise price for the portion of the option being exercised, and
of any associated withholding tax obligations, in any of the
following manners: (1) in cash (including by wire transfer or
by a personal check backed by sufficient funds); (2) by
surrendering or attesting to ownership of vested and nonforfeitable
securities of the class then subject to the option with an
aggregate Fair Market Value on the date of exercise equal to total
amount owed; (3) by electing to receive securities of the
class then subject to the option having a Fair Market Value, as of
the date of exercise, equal to the excess, if any, of (x) the
Fair Market Value on the date of exercise of the securities subject
to exercise over (y) the sum of the aggregate option exercise
price, and the applicable tax withholding amounts, for such
exercise; (4) in any other manner previously approved by the
Board or the Committee; or (5) through any combination of the
foregoing. Securities purchased by Executive, by exercising the
option, shall be delivered to Executive as promptly as reasonably
practicable after the exercise.
(C) The term of the option
shall be 7 years from the Grant Date.
2. Restricted Stock.
Effective immediately after the Closing, Company will grant to
Executive a number of restricted shares of Common Stock having a
value of $162,500. The value of the shares shall be based on the
closing price per share on the Commencement Date, as reported on
the Eastern Edition of The Wall Street Journal. The award agreement
shall include the following terms and conditions.
(A) Vesting. The restricted
shares will vest, and accordingly become non-forfeitable, on the
third anniversary of the date of grant of the restricted shares but
no later than August 31, 2010, subject to Executive’s
continued employment with the Company on such vesting date. The
Shares will carry cash dividend rights prior to vesting to the
extent cash dividends or securities of the same class are paid, or
declared, prior to vesting.
(B) Share Withholding. To the
extent permitted by law, upon any vesting of securities then
subject to the grant, Executive may satisfy any associated tax
without obligation in any of the manners provided in 3(g)(1)(ii)
above.
3. At all times following any
vesting of Executive stock option or restricted share awards, the
securities that are the subject of the vested portions of the
awards: will be registered with the Securities and Exchange
Commission; listed for trading on the principal stock exchange on
which securities of the class subject to the award are then listed
(if any); and will be free from contractual restrictions on sale,
subject to the Company’s trading policies for executive
officers of the Company. !
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 upon
sixty days written notice from the Company upon Executive’s
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 Chief Executive Officer of the
Company, which demand identifies in reasonable detail 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 Section 8 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) Executive’s
conviction or pleading guilty or entering a plea of nolo contendre
to a felony (including, without limitation, any felony constituting
a crime of moral turpitude); or
(iv) material breach by the
Executive of the Executive’s obligations under this
Agreement
(v) failure of Executive to
relocate to a residence within 50 miles of Louisville, Kentucky by
August 1, 2008.
(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, incentive bonus opportunity or
long-term incentive opportunity; or
(ii) material failure by the
Company to comply with any provision 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.
(iii) Any material diminution
in Executive’s authority or assignment to Executive of duties
that materially impair his ability to perform his duties in effect
at that time.
(iv) Relocation of the
Company’s principal office or Executive’s principal
place of employment, to a location more than 50 miles from
Louisville, Kentucky.
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 Executive has knowledge of 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 notice to Executive that the
Company is terminating his employment hereunder because 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.
2. 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 eighteen months after
the Date of Termination of the Executive’s then 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 eighteen month period after
the Date of Termination; and
(2) for the eighteen 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 eighteen 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 eighteen 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.
(3) Each stock option and
restricted stock shall, to the extent it would have become vested
on or before the third anniversary of the Date of Termination if
Executive remained employed by the Company on such anniversary, be
fully vested as of the Date of Termination and, in the case of
stock options shall be, and remain, fully exercisable until the
second anniversary of the Date of Termination.
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
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 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) Occurrence of a Change of
Control. If there is a Change of Control, as defined in
Section 5(d)(i) below, during the Term, the provisions of this
Section 5(d) shall apply and shall continue to apply
throughout the remainder of Employment Period. Upon a Change of
Control the Executive shall immediately become vested in any
outstanding options, restricted stock, or other equity incentive
award. If after a Change in Control the Executive’s
employment is terminated without cause (in accordance with
Section 5(a) above) or the Executive shall terminate his
employment as the result of one or more of the events identified in
Section 5(d)(ii), the Company shall immediately pay to the
Executive (or the Executive’s estate, if applicable) the
payments described under Section 5(a); 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, b
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