TRANSITION SERVICES AGREEMENT

Exhibit 10.1

EXECUTION VERSION

CONFIDENTIAL

TRANSITION SERVICES AGREEMENT

dated as of July 31, 2007

by and between

KINDRED HEALTHCARE, INC.

and

PHARMERICA CORPORATION

TABLE OF CONTENTS

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TABLE OF CONTENTS

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THIS TRANSITION SERVICES AGREEMENT is dated as of July 31, 2007 (this “ Agreement ”), between Kindred Healthcare, Inc., a Delaware corporation (“ Rhino ”), and PharMerica Corporation, a Delaware corporation formerly known as Safari Holding Corporation (the “ Company ”).

WHEREAS, Rhino, Kindred Pharmacy Services, Inc., a Delaware corporation (“ RhinoRx ”), AmerisourceBergen Corporation, a Delaware corporation (“ Hippo ”), PharMerica Long-Term Care, Inc., a Delaware corporation formerly known as PharMerica Inc. (“ HippoRx ”), the Company and certain other parties have entered into a Master Transaction Agreement dated as of October 25, 2006 (the “ Master Transaction Agreement ”);

WHEREAS, the Company desires to purchase from Rhino, and Rhino desires to provide to the Company, certain transition services for specified periods following the closing under the Master Transaction Agreement (the “ Closing ”); and

WHEREAS, execution of this Agreement is a condition to consummation of the transactions contemplated by the Master Transaction Agreement.

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Defined Terms . Capitalized terms used but not defined herein shall have the meanings set forth in the Master Transaction Agreement, as it may be amended from time to time by the parties thereto. As used in this Agreement, the following terms shall have the following meanings:

“ Agreement ” has the meaning set forth in the preamble.

“ Business ” means the business of the Company and its Subsidiaries, as conducted from time to time.

“ Change of Control ” means any person (or a “group” (within the meaning of Section 13(d) of the Exchange Act)) becoming the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing a majority of the combined voting power of the Company’s then outstanding securities.

“ Closing ” has the meaning set forth in the recitals.

“ Company ” has the meaning set forth in the preamble.

“ Confidential Information ” has the meaning set forth in Section 2.02.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

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“ Hippo ” has the meaning set forth in the recitals.

“ HippoRx ” has the meaning set forth in the recitals.

“ Line Item of Service ” has the meaning set forth in Section 2.01(a).

“ Notice of Election ” has the meaning set forth in Section 3.02(c)(i).

“ Master Transaction Agreement ” has the meaning set forth in the recitals.

“ Project Executives ” has the meaning set forth in Section 3.07.

“ Rhino ” has the meaning set forth in the preamble.

“ RhinoRx ” has the meaning set forth in the recitals.

“ Term ” has the meaning set forth in Section 2.01(a).

“ Termination Assistance ” has the meaning set forth in Section 2.07(a).

“ Third Party Provider ” has the meaning set forth in Section 2.01(e).

“ Transition Services ” has the meaning set forth in Section 2.01(a).

SECTION 1.02. General Interpretive Principles . (a) Words in the singular shall include the plural and vice versa, and words of one gender shall include the other gender, in each case, as the context requires, (b) the term “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement and not to any particular provision of this Agreement and Article, Section, paragraph and Schedule references are to the Articles, Sections, paragraphs and Schedules to this Agreement unless otherwise specified and (c) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified.

ARTICLE II

SERVICES

SECTION 2.01. Provision of Services; Reimbursement of Expenses . (a) Rhino agrees to provide, or cause to be provided, solely to the Company and its Subsidiaries each line item of service (each such item, a “ Line Item of Service ”) set forth on Schedule A attached hereto and made a part hereof (all such Line Items of Service and the services provided under Section 2.01(c) hereof being, collectively, the “ Transition Services ”) for a period of 12 months following the Closing, subject to earlier termination or extension in accordance with the terms of this Agreement (the “ Term ”).

(b) If it becomes necessary for Rhino to increase staffing or acquire equipment or make any investments or capital expenditures to accommodate an increase in the use of any Transition Service beyond the level of use of such Transition Service immediately following the

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Closing as a result of a material increase in volume of the Business or a material change in the manner in which the Business is being conducted, Rhino shall inform the Company in writing of such necessity before any such increase, acquisition, investment or capital expenditure is made. Upon mutual agreement of Rhino and the Company acting in good faith as to the necessity of any such increase, acquisition, investment or capital expenditure, the Company shall reimburse Rhino an amount equal to the actual costs and expenses incurred in connection therewith. If such mutual agreement is not reached, Rhino’s obligation to provide or cause to be provided such Transition Service shall be limited to the level of such Transition Service then in effect.

(c) Prior to a Change of Control, the Company shall pay to Rhino for each Line Item of Service the applicable fees set forth on Schedule A . Following a Change of Control, the Company shall pay to Rhino for each Line Item of Service the applicable fees set forth on Schedule B . Compensation for Transition Services shall be computed solely as set forth in Schedule A or Schedule B , as applicable, and shall not take into account the value of any referral for the provision of health care services that Rhino or the Company may otherwise generate between each other. Rhino shall deliver a statement to the Company each month for Transition Services provided to the Company during the preceding month, and such statement shall set forth a brief description of such Transition Services and the amounts charged therefor. Any payments by the Company payable pursuant to this Agreement shall be made in U.S. Dollars by wire transfer of immediately available funds to an account designated by Rhino no later than 30 days following the Company’s receipt of the applicable statement, without set-off, defense or counterclaim. Rhino reserves the right to suspend performance under this Agreement upon failure of the Company to make any payment pursuant to this Agreement in the time period required by the immediately preceding sentence.

(d) Rhino shall cause the Transition Services to be provided with the same level of care used by Rhino or its Affiliates in the conduct of Rhino’s or its Affiliates’ businesses. EXCEPT AS PROVIDED IN THIS AGREEMENT, RHINO MAKES NO WARRANTIES OR REPRESENTATIONS OF ANY KIND WHATSOEVER WITH RESPECT TO THE TRANSITION SERVICES PERFORMED OR PROVIDED TO THE COMPANY HEREUNDER, WHETHER EXPRESS OR IMPLIED, STATUTORY, BY OPERATION OF LAW OR OTHERWISE, AND RHINO EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND SUITABILITY OF THE TRANSITION SERVICES. The Company acknowledges that certain Line Item(s) of Service may be provided by third-party providers with whom Rhino or an Affiliate of Rhino has contracted for such Line Item(s) of Service (each, a “ Third Party Provider ”); provided that Rhino shall not contract a Third Party Provider for the provision of any material portion of any Line Item of Service without the Company’s prior written consent, such consent not to be unreasonably withheld or delayed (for the avoidance of doubt, the parties agree that it would not be unreasonable for the Company to withhold its consent to Rhino’s contracting a Third Party Provider if such Third Party Provider does not agree to provide the Company with the same level of service, representations and warranties or indemnification as provided by Rhino to the Company hereunder). Rhino makes no representation or warranty of any kind with respect to any Line Item of Service provided by a Third Party Provider.

(e) Subject to the Company’s continuing obligation to make payments then owing pursuant to this Agreement, the Company may terminate the Term as to any or all Transition

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Services upon 60 days’ prior written notice to Rhino. If Rhino shall cease to provide a particular Line Item of Service for itself or the particular Line Item of Service is provided by a Third Party Provider and Rhino’s contract with such Third Party Provider has expired or terminated, Rhino may cease to provide such Line Item of Service to the Company, effective as of the later of (x) the time that Rhino ceases to provide such Line Item of Service for itself or the date on which Rhino’s contract with such Third Party Provider expires or terminates and (y) following 60 days’ notice to the Company. This Agreement may be immediately terminated by Rhino in its sole discretion with respect to a Subsidiary of the Company to which Transition Services are provided pursuant to this Agreement upon the sale by the Company of all or substantially all of the capital stock of the Subsidiary or a merger with a third party of such Subsidiary.

(f) The Company acknowledges that the demand for Transition Services may exceed Rhino’s available capacity to provide such Transition Services to the Company, making it necessary for Rhino to prioritize among the requests for Transition Services made by the Company to Rhino or take other steps to manage efficiently the provision of such Transition Services to the Company.

(g) The Transition Services will be provided by Rhino in accordance with Rhino’s policies and procedures in effect as of the date of the Master Transaction Agreement. The Company shall conform to the requirements of such policies or procedures.

(h) Rhino shall be reimbursed by the Company for all reasonable out-of-pocket expenses incurred in connection with the provision of Transition Services under this Agreement.

SECTION 2.02. Confidential Information . (a) Any information of either party to this Agreement provided to or accessible by the other party in connection herewith, regardless of form, including all data, processes, technical drawings, designs and concepts; software programs, routines, formulae and concepts, production plans, designs, layouts and schedules; marketing analyses, plans, customer data and surveys; and all matters relating to either party’s finances and personnel and any other information (“ Confidential Information ”) shall be received and held in strict confidence, used only for purposes related to this Agreement or as provided in the other Transaction Agreements and shall not otherwise be disclosed by the other party, its agents, employees, contractors or subcontractors, without the prior written consent of the disclosing party. “Confidential Information” as defined herein does not include any information (i) lawfully received by the receiving party on a non-confidential basis from another source which is not known by the receiving party to be bound by an obligation of confidentiality or otherwise restricted from transmitting the information by a contractual, legal or fiduciary obligation, (ii) that is or becomes generally available to the public other than as a result of a breach of this Section 2.02(a), (iii) known to the receiving party at the time of disclosure free from any confidentiality obligations, provided that the source of such information is not known by the receiving party to be bound by an obligation of confidentiality or otherwise restricted from transmitting the information by a contractual, legal or fiduciary obligation or (iv) independently developed by the receiving party without the use of or reference to Confidential Information. Each party shall be fully responsible for breaches of its obligations under this Section 2.02 by its agents, employees, contractors or subcontractors. Upon expiration or any termination of this Agreement, Rhino and the Company shall return, or at the receiving party’s option destroy, all documentation in any medium that contains or refers to the disclosing party’s

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Confidential Information, and retain no copies, other than one archival copy for evidentiary purposes. Any destruction of Confidential Information in accordance with the preceding sentence shall be certified in writing by an authorized officer of the receiving party at the request of the disclosing party.

(b) The Confidential Information of the disclosing party is, and shall remain, the property of the disclosing party.

SECTION 2.03. Access . (a) The Company agrees that it shall, without charge, provide Rhino (or any Affiliate of Rhino or Third Party Provider) with such access to the Company’s premises and/or personnel, and such assistance, as may reasonably be required for Rhino (or such Affiliate of Rhino or such Third Party Provider) to perform its obligations under this Agreement. If either party has access (either on-site or remotely) to any of the other party’s computer systems in relation to the Transition Services, such party shall limit such access solely to the use of such systems for purposes of the Transition Services and shall not access or attempt to access any of such other party’s computer systems, files, software or services other than those required for the Transition Services, or those that are publicly available. Each party shall limit such access to those of its employees, agents or contractors with a bona fide need to have such access in connection with the Transition Services, and shall follow all the other party’s security rules and procedures for restricting access to its computer systems in effect as of the date of the Master Transaction Agreement. All user identification numbers and passwords disclosed to a party and any information obtained by such party as a result of such party’s access to and use of the other party’s computer systems shall be deemed to be, and treated as, Confidential Information hereunder. Rhino and the Company shall coo