PHARMERICA CORPORATION PharMerica Corporation 2007 Omnibus Incentive Plan Substitution Non-Qualified Stock Option Agreement

Exhibit 10.32

PHARMERICA CORPORATION

PharMerica Corporation 2007 Omnibus Incentive Plan

Substitution Non-Qualified Stock Option Agreement

THIS SUBSTITUTION NON-QUALIFIED STOCK OPTION AGREEMENT (the “Agreement”), granted under the PharMerica Corporation 2007 Omnibus Incentive Plan (the “Plan”), is effective as of              , 20      , and is entered into by and between PharMerica Corporation, a Delaware Corporation (the “Company”), and                                          (the “Optionee”).

Preliminary Statements

WHEREAS , the Optionee was formerly an employee of Kindred Healthcare, Inc. (“Kindred”) who was granted an option to purchase              shares of Kindred common stock with an exercise price of $              on              ,          (the “Kindred Option”);

WHEREAS , in connection with the merger of Kindred with and into the Company, the Company has determined that it is desirable and in its best interests to substitute the Kindred Option with an option to purchase shares of the Company’s Stock (the “Stock”) in such manner that the substitution shall not be considered a new option grant or a modified option under Section 424 of the Code; and

WHEREAS , any capitalized term not herein defined shall have the meaning as set forth in the Plan.

NOW, THEREFORE , in consideration of the mutual promises and covenants contained herein:

1. Grant of Option . On the terms and conditions of this Agreement and the Plan, the Company hereby grants to the Optionee the right and option (the “Option”) to purchase from the Company              shares of Stock. This Option shall not constitute an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The date of grant of this Option is              , 200    (the “Grant Date”). The Optionee acknowledges and agrees that this Option is a substitution for the Kindred Option and that effective as of the Grant Date, the Optionee shall have no rights under the Kindred Option.

The Optionee’s right, if any, to continue to be employed by the Company will not be enlarged or otherwise affected by the receipt of this Option, and the receipt of this Option will not in any way restrict the right of the Company to terminate the Optionee’s employment at any time.

2. Price . The purchase price (the “Option Price”) for the shares of Stock subject to the Option granted by this Agreement is $              per share.

3. Vesting of the Option . The Option granted pursuant to this Agreement shall vest and become exercisable in accordance with the following provisions:

(a) Vesting of the Option. Provided that the Optionee remains in the continuous employment of the Company through the vesting period, the Option shall vest and become exercisable in accordance with the following schedule:

There shall be no proportional vesting prior to any Vesting Date; all vesting shall occur only on the Vesting Date.

(b) Acceleration of Vesting of the Option . The Option shall become fully vested and exercisable in the event of a Change in Control or the death or Disability of the Optionee while employed with the Company. Notwithstanding the foregoing, the Committee, in its sole and absolute discretion, may accelerate all or any portion of the vesting of the Option at any time.

(c) Forfeiture of the Option . The unvested portion of the Option shall automatically be forfeited upon the date that the Optionee ceases to be employed by the Company for any reason.

4. Exercise of the Option . Except as otherwise provided herein, the Option granted pursuant to this Agreement shall be exercisable as follows:

(a) Exercise by the Optionee . Only the Optionee receiving the Option (or, in the event of the Optionee’s legal incapacity or incompetency, the Optionee’s guardian or legal representative and in the case of the Optionee’s death, the Optionee’s estate) may exercise the Option.

(b) Option Term. Any non-forfeited portion of the Option shall be exercisable until the date it terminates. The Option shall no longer be exercisable and shall terminate upon the earliest to occur of:

(i) the commencement of business on the date the Option