BrightSpring Health Services Inc

Compensation Discussion and Analysis

This compensation discussion and analysis provides an overview of our executive compensation philosophy and the material elements of compensation awarded to, earned by, or paid to our named executive officers with respect to the year ended December 31, 2023. Our executive compensation plan is designed to attract and retain individuals qualified to manage and lead our Company and to also motivate them to contribute to the achievement of our financial and operational goals and ultimately create and grow our equity value.

Our named executive officers for 2023 were:

Compensation Philosophy, Objectives & Process – How We Make Compensation Decisions

Our Compensation Philosophy and Objectives

Our primary executive compensation philosophy and objectives are to:

•

attract, reward, and retain the people that drive quality, operations, efficiency, growth, and profitability;

•

provide fair and competitive compensation opportunities that appropriately reward executives for their contributions to our success; and

•

align senior management’s interests with our equity owners’ long-term interests through equity participation and ownership.

We seek to maintain a quality and performance-oriented culture and a compensation approach that rewards our named executive officers when we achieve our goals and objectives, while putting at risk an appropriate portion of their compensation if our goals and objectives are not achieved. Consistent with this philosophy, we have sought to create an executive compensation package that balances short-term versus long-term components, cash versus equity elements and fixed versus contingent payments in ways that we believe are most appropriate to motivate them.

Transition of Our Executive Compensation Programs

Our compensation approach is tied to our stage of development. Prior to our IPO, we were a privately-held company. As a result, we were not subject to any stock exchange listing or SEC rules related to Board and compensation committee structure and function. In April 2021, we engaged Meridian Compensation Partners, a compensation consulting firm, to provide executive compensation consulting services to help align executive pay with market practices for executive pay decisions following our IPO.

As our executive compensation program evolves as a public company, we expect that it will reflect the belief that the total amount earned by our executives will depend on achieving performance objectives designed to enhance stockholder value. We intend to continue to evaluate and possibly make changes to our executive compensation programs with the goal of aligning our programs with our executive compensation philosophy as a public company. Accordingly, the compensation paid to our named executive officers for 2023, and the form and manner in which it was paid, is not necessarily indicative of how we will compensate our named executive officers after our IPO.

Role of Our Board of Directors and Executive Officers

Prior to our IPO, we were a privately-held company and, with the exception of equity compensation, the compensation of our executive officers was largely set by our Chief Executive Officer, except with respect to himself. Our compensation committee and our Board of Directors have determined and approved long-term executive compensation for our executive officers after taking into consideration the recommendations of our Chief Executive Officer, except with respect to his own long-term executive compensation. Our compensation committee and our Board of Directors annually review our Chief Executive Officer’s performance and approve any changes to his compensation package in light of such review. Our Chief Executive Officer does not participate in deliberations regarding his own compensation. Our Chief Executive Officer periodically reviews each other named executive officer’s performance with our Board of Directors and recommends an appropriate base salary, annual incentive payout, relevant discretionary bonuses, if applicable, and grants of long-term equity incentive awards.

Except where the context requires otherwise, the terms “Board” or “Board of Directors” as used in this “Executive Compensation” section refer to the Board of Directors of BrightSpring Health Services, Inc. (formerly known as Phoenix Parent Holdings Inc.).

Role of the Compensation Consultant

In April 2021, we engaged Meridian Compensation Partners, a compensation consulting firm (the "Consultant"), to provide executive compensation consulting services to help align executive pay with market practices following our IPO.

In connection with our IPO, the Consultant performed a variety of work, including but not limited to: assisting in the development of a market-based executive compensation program and conducting a review of the competitiveness of our executive compensation program. To assist our Board of Directors in its review and evaluation of each of these areas in connection with our IPO, the Consultant established a peer group for 2023 composed of 19 companies described below. The peer group was selected based on weighted parameters and financial information and is intended to ensure that the Company remains within a reasonable range of the peer median in terms of revenue, headcount, and market value.

Elements of Compensation – What We Pay and Why

Base Salary

Base salary compensates executives for performing the requirements of their positions and provides executives with a predictable and stable level of cash income with respect to a portion of their total compensation. Base salaries are intended to reward performance and to attract and retain key executives. Base salaries may be adjusted annually and, in certain circumstances, adjusted mid-year to address competitive pressures or changes in job responsibilities.

Base salary rates for 2023 were as follows:

Effective May 16, 2023, Mr. Rousseau received a base salary increase of 25%. None of our other named executive officers received increases to their base salaries in 2023.

Annual Cash Incentive Program

During 2023, we provided our continuing named executive officers with the opportunity to share in our success through annual cash incentive awards under the BrightSpring Health Services Short Term Incentive Compensation Plan, or the BHS STIC. The BHS STIC is designed to provide each participant with a “balanced scorecard” for the participant’s annual cash incentive award. The “balanced scorecard” establishes specific corporate performance goals balanced by goals from the officer’s individual area of responsibility and the officer’s expected level of contribution to the Company’s achievement of its corporate goals. Payouts under the BHS STIC are based on our achievement of predefined financial and operational performance targets included within the balanced scorecard. For 2023, the BHS STIC focused on our ability to grow total company-wide profitability (EBITDA, calculated as described in the Part II Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K) and our ability to improve company-wide or business unit performance in the areas of quality, people, efficiency, and growth. The balanced scorecard approach is designed to encourage a consistent, long-term management approach to enhancing stockholder value.

For 2023, performance objectives were set at levels that we believed would reflect strong performance based on historical performance and the then-prevailing relevant market conditions in our businesses and macroeconomic conditions. We believe the combination of these performance measures and the proportionate weighting assigned to each reflected our overall goals for 2023, which balanced the achievement of our financial performance with the other scorecard categories. The BHS STIC requires that a minimum EBITDA trigger be met as the “gate” into the plan. If this minimum EBITDA trigger is not achieved for the calendar year performance period, then the plan will not be funded and payouts will not be made to the participant. In addition, awards under the BHS STIC, if earned, are generally contingent upon the participant remaining in continuous employment through the payment date.

The following table illustrates the weighting of each of the scorecard objectives under the BHS STIC for each continuing named executive officer:

(1)

Free cash flow for Messrs. Rousseau, Mattingly, and Reed. Consolidated community living worked wages plus temporary labor as a percentage of Revenue for Mr. Barnes. Consolidated Pharmacy Inventory Days on Hand, Accounts Receivable DSO, and SG&A as a percentage of Revenue for Ms. Yowler.

Payouts are based on threshold, target, and maximum levels of achievement of the performance objectives applicable to participants. Threshold refers to the minimum acceptable level of performance required for bonus payout consideration, target is the desired level of performance, and maximum is aspirational performance. We focus on matching rewards with results and encourage executive officers to make significant contributions toward our financial results by providing a basic reward for reaching threshold expectations, plus an upside for reaching our aspirational goals. We believe that establishing a maximum payout amount under the BHS STIC deters excessive risk-taking, while having an equitable payout amount that can be earned at a defined performance threshold encourages goal attainment. No payout is made for performance below the minimum threshold. Notwithstanding the forgoing, we have reserved the ability to adjust the actual financial performance results to exclude the effects of extraordinary, unforeseen, unusual, or infrequently occurring events.

The following tables also illustrate the EBITDA and revenue trigger percentage for plan funding and payout.

Messrs. Rousseau, Mattingly, Reed, Barnes, and Ms. Yowler

Under the BHS STIC, with respect to EBITDA and Revenue, if achievement falls between the threshold and target payout percentages, or between the target and maximum payout percentages, the achievement factor will be interpolated on a straight-line mathematical basis. However, for all other scorecard objectives there is no interpolation between achievement levels and participants must fully achieve the next level of performance on the scale to achieve a higher payout. If achievement with respect to any performance objective does not reach threshold payout percentage, then that objective will be deemed to have 0% attainment.

For each of the performance objectives, the achievement factor is determined by calculating the payout percentage against the target award opportunity based on the pre-established scale for each plan illustrated in the tables below. The weighted achievement factor for each of the performance objectives is determined by multiplying the weight attributed to each performance objective by the applicable achievement factor for each measure. The following tables outline the estimated calculation of the funding attainment based on the pre-established scale associated with our actual results against the targets and the resulting weighted achievement factors.

Messrs. Rousseau, Mattingly, and Reed

(1)

(2)

Cash flows, as adjusted is defined as cash flow before debt and acquisition-related items.

Mr. Barnes

(1)

(2)

Turnover – the rolling 12 months of terminations excluding quick quits divided by the total number of employees at the beginning of the measurement period.

(3)

Stability – the total number of employees with at least one year of service paid during a rolling 12-month period divided by the total number of employees paid during the same period.

Ms. Yowler

(1)

For 2023, our continuing named executive officers’ target annual cash incentive award as a percentage of earned base salary was 125% for Mr. Rousseau, 100% for Messrs. Mattingly and Reed, and 60% each for Mr. Barnes and Ms. Yowler. Actual amounts paid under the BHS STIC were calculated separately for each scorecard performance objective by multiplying each named executive officer’s base salary earned in 2023 by (i) the executive’s BHS STIC target award opportunity (which is reflected as a percentage of earned base salary) and (ii) the executive’s weighted performance objective achievement factor for that objective, and then adding the results together.

The following table illustrates the calculation of the payout earned under the BHS STIC by each of our continuing named executive officers.

(1)

Amounts show for Mr. Rousseau reflect his salary increase from $800,000 to $1,000,000, effective as of May 16, 2023.

Notwithstanding the establishment of the performance components and the formula for determining the BHS STIC award payment amounts as described above, we have the ability to exercise positive or negative discretion and award a greater or lesser amount than determined by the above formula if, in the exercise of our business judgment, we determine that a greater or lesser amount is warranted under the circumstances.

Additional details regarding the dollar value of threshold, target, and maximum bonus payout opportunities for 2023 are provided under “Executive Compensation Tables—Grants of Plan-Based Awards.”

Long-Term Incentive Program

In addition to base salary and cash bonus compensation, each of our continuing named executive officers is eligible for long-term equity awards. The LTI program is designed to reward for future Company performance, align with the long-term interests of our stockholders and to retain executives over multi-year vesting periods. LTI compensation provides an opportunity for executive officers to increase their ownership interest in the Company through grants of equity-based awards.

The Board of Directors adopted the 2017 Stock Plan, effective January 24, 2018. To date, the only form of equity award granted to our executive officers have been stock options under the 2017 Stock Plan. The 2017 Stock Plan was terminated upon our IPO. As a result, no further awards will be made under the 2017 Stock Plan; however, awards granted under the 2017 Stock Plan will continue to be governed by their existing terms.

Since the adoption of the 2017 Plan, equity awards have been granted in connection with an executive’s initial employment, and upon a significant performance contribution or increase in responsibility or job scope. Our Board of Directors determines the amount of long-term executive compensation for our executive officers after taking into consideration the recommendations of our Chief Executive Officer (except with respect to his own long-term incentive compensation), the outstanding holdings of each executive officer, organizational significance of their position, and individual performance (both historical and expected future performance). Mr. Rousseau was our only named executive officer who received an equity grant in 2023.

Option Awards Granted in 2021

In May 2021, our Board of Directors granted 137,398 stock options to Mr. McMaude. The stock options are divided into time-vesting options (50% of the stock options granted) and performance-vesting options (50% of the stock options granted, of which 50% are 2.0x performance-vesting stock options and 50% are 2.5x performance-vesting stock options). The grant date fair value, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation, or Topic 718, for this award is reported in the Summary Compensation Table. Additional details regarding the equity award described above, including grant date and exercise price, are provided under “Executive Compensation Tables—Outstanding Equity Awards at December 31, 2023.”

The stock options have a ten-year term and vest as follows:

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The time-vesting stock options vest ratably over five years, with 20% vesting on each of the first five anniversaries of a specified vesting reference date, subject to continued employment or service through each applicable vesting date.

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The 2.0x performance-vesting stock options vest when and if KKR Stockholder receives cash proceeds with respect to or in exchange for equity securities of the Company equal to a 2.0x multiple on its investment, subject to continued employment or service through each applicable measurement date.

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The 2.5x performance-vesting stock options vest when and if KKR Stockholder receives cash proceeds with respect to or in exchange for equity securities of the Company equal to a 2.5x multiple on its investment, subject to continued employment or service through each applicable measurement date.

Subject to the call rights described below, in connection with a termination of employment for “cause” or in the event of a “restrictive covenant violation” (each as defined in the applicable stock option award agreements), all stock options, whether vested or unvested, will be immediately forfeited.

Option Awards Cancelled and Granted in 2023

In November 2023, our Board of Directors approved the cancellation of 628,108 vested stock options held by Mr. Rousseau (215,912 stock options) and by an irrevocable trust for which Mr. Rousseau’s spouse serves as trustee (412,196 stock options) in exchange for a cash payment of $3,437,500 and $6,562,500, respectively, and simultaneously granted 628,108 stock options to Mr. Rousseau. The stock options are time-vesting options and were granted at fair value, provided that, if an initial public offering occurs within six months following the date of grant and the per share price at which the Company’s common stock is offered to the public is higher than the exercise price set forth in the stock option agreement, then the exercise price is automatically increased on the pricing date of such initial public offering to the per share price at which the Company’s common stock is offered to the public in connection with such initial public offering. The grant date fair value, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation, or Topic 718, for this award is reported in the Summary Compensation Table. Additional details regarding the equity award described above, including grant date and exercise price, are provided under “Executive Compensation Tables—Outstanding Equity Awards at December 31, 2023.”

The stock options granted to Mr. Rousseau in 2023 have a ten-year term and vest as follows:

•

If the Company has not completed an initial public offering within six months of the date of grant, the time-vesting stock options vest 100% on the six month anniversary of the date of grant.

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If the Company has completed an initial public offering within six months of the date of grant, then one third of the time-vesting stock options vest upon the six month anniversary of the date of grant, with the remaining unvested time-vesting stock options vesting ratably and monthly over the next two years, subsequent to the date of grant, subject to continued employment or service through each applicable vesting date.

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If Mr. Rousseau has not undergone a termination (which does not include termination without cause, resignation for good reason, or Mr. Rousseau’s death or disability) then all then-unvested time-vesting stock options will fully vest upon a change in control at the time of such event.

If Mr. Rousseau is terminated by us without cause, resigns for good reason, or due to Mr. Rousseau’s death or disability, all then unvested stock options granted in 2023 shall become fully vested upon such termination.

Subject to the call rights described below, in connection with a termination of employment for “cause” or in the event of a “restrictive covenant violation” (each as defined in the applicable stock option award agreements), all stock options, whether vested or unvested, will be immediately forfeited.

Call Rights

The stock options held by our named executive officers are subject to call rights as set forth in the stockholders agreement described under “Certain Relationships and Related Party Transactions,” as follows:

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If the named executive officer’s employment with us is terminated by us for cause, or if a restrictive covenant violation occurs, we have the right, but not the obligation, for a 12-month period following such termination of employment or restrictive covenant violation, as applicable, to purchase the shares issued upon the exercise of a stock option held by such named executive officer at a price per share equal to the lesser of fair market value and cost, which means that such shares will be effectively forfeited; and

•

If the named executive officer’s employment with us is terminated for any reason other than as set forth above, we have the right, but not the obligation, for a 12-month period following such termination of employment, to purchase the shares issued upon the exercise of a stock option held by such named executive officer at a price per share equal to fair market value and, if a change in control or an initial public offering occurs during the three-month period following our exercise of the call right, the named executive officer will be entitled to receive an amount equal to the excess, if any, of the fair market value per share on the date of the change in control or initial public offering, as applicable, over the fair market value per share paid by us when we exercised the call right.

For more information on vesting and other treatment of these stock options upon specified termination events or a change in control, see “Termination and Change in Control Arrangements” and “Potential Payments Upon Termination or Change of Control.”

Executive and Broad-Based Employee Benefits

Our continuing named executive officers are eligible to receive the same medical, dental, vision, and voluntary benefits offered to all other full-time employees. Additionally, our continuing named executive officers are eligible to receive enhanced life and disability benefits, including group term life and accidental death & dismemberment insurance (2.0x their annual base salary up to $1.5 million), full income replacement as a result of a short term disability for up to 26 weeks, and a long term disability benefit of 70% of monthly earnings up to a maximum of $20,000 per month. The enhanced short-term disability benefit program is self-funded (i.e., no premiums are paid to a third-party insurer) and thus there is no incremental cost to the Company to provide this benefit, as no specific allocation of cost is made to any named executive officer prior to the occurrence of a disability.

During 2023, we sponsored and maintained a plan qualified under Section 401(k) of the Internal Revenue Code for all eligible employees, including our named executive officers, which we refer to as our 401(k) Plan. Under the 401(k) Plan, eligible employees may elect to defer a portion of their compensation, up to the limit prescribed by the Internal Revenue Service. Ms. Yowler is our only named executive officer eligible to receive any discretionary employer matching contributions under our 401(k) Plan with respect to 2023. Ms. Yowler did not receive any discretionary employer matching contribution with respect to 2023.

In addition, in 2023, under our BrightSpring Health Services Nonqualified Deferred Compensation Plan, management and other highly compensated employees were permitted to defer up to 50% of their annual salary. Ms. Yowler is our only named executive officer to elect to defer any compensation with respect to 2023. Ms. Yowler deferred $9,299 of her annual salary with respect to 2023.

Severance Arrangements

Our employment arrangements with each of our named executive officers provide for payments and other benefits in connection with certain qualifying terminations of employment. Our Board of Directors believes that these severance benefits: (1) help secure the continued employment and dedication of our named executive officers; (2) enhance our value to a potential acquirer because our named executive officers have non-competition, non-solicitation, and confidentiality provisions that apply after any termination of employment, including after a change in control; and (3) are important as a recruitment and retention device, as many of the companies with which we compete for executive talent have similar agreements in place for their senior management.

Additional information regarding the severance arrangements with each of our named executive officers, including a quantification of benefits that would have been received by each named executive officer who are currently employed by the Company had his employment terminated on December 30, 2023, is provided under “Termination and Change in Control Arrangements.”

Actions Taken in Connection with our IPO

Post-IPO Long-Term Incentive Plan

In connection with our IPO, our Board of Directors adopted, and our stockholders have approved, our 2024 Incentive Plan, which will allow us to implement a new market-based long-term incentive program to align our executive compensation package with similarly situated public companies.

New Equity Awards

In connection with our IPO, our Board of Directors approved the New Equity Awards.

Acceleration of Certain Options under 2017 Stock Plan

In connection with our IPO, our Board of Directors approved the acceleration of all 2.0x performance-vesting stock options outstanding under the 2017 Stock Plan, effective as of the pricing of the IPO. The vesting terms of these performance-vesting stock options are described under “Elements of Compensation—What We Pay and Why—Long-Term Incentive Program.”

Clawback Policy

We have adopted an incentive compensation clawback policy that complies with the SEC and Nasdaq requirements.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with the Company’s management the executive compensation discussion and analysis (the “CD&A”) that precedes this report. Based on this review and discussion, the Compensation Committee has recommended to our Board of Directors that the CD&A be included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Respectfully submitted by the members of the Compensation

Committee of the Board.

Max Lin, Chair

Hunter Craig

Matthew D’Ambrosio

Executive Compensation Tables

Summary Compensation Table

The table below summarizes the total compensation paid to or earned by each of our named executive officers for the years indicated.

(1)

Amounts reflect the named executive officer’s annual base salary earned during the applicable year taking into account increases, if any, in base salary during the course of the year.

(2)

For Ms. Yowler, amount reflects a discretionary transaction bonus of $24,952 in recognition of significant efforts.

(3)

Amount reflects the aggregate grant date fair value of time-vesting stock options granted to Mr. Rousseau by us in 2023, computed in accordance with Topic 718, disregarding the effect of estimated forfeitures. With respect to Mr. Rousseau, the time-vesting stock options were granted at fair value, provided that, if an initial public offering occurs within six months following the date of grant and the per share price at which the Company’s common stock is offered to the public is higher than the exercise price set forth in the stock option agreement, then the exercise price is automatically increased on the pricing date of such initial public offering to the per share price at which the Company’s common stock is offered to the public in connection with such initial public offering. The assumptions made in the valuation of our equity awards are found in Note 10 to our audited consolidated financial statements included elsewhere in Annual Report on Form 10-K.

(4)

“All Other Compensation” for 2023 consists of the following:

(1)

Additional details regarding the stock option cancellation are provided under “Option Awards Cancelled and Granted in 2023.”

(2)

Amounts reflect Mr. Rousseau’s use of a private plane.

Grants of Plan-Based Awards

The following table provides information on bonus opportunity ranges under the BHS STIC for each of our continuing named executive officers.

(1)

Amounts reflect, with respect to each of our named executive officers, the possible payouts of cash incentive compensation under the BHS STIC. Under the BHS STIC, the threshold amount is calculated as the minimum amount that could be payable under the applicable plan to the participating executive assuming satisfaction of the initial EBITDA trigger required to fund the particular plan (disregarding, for purposes of this calculation, potential adjustments of an executive’s bonus payout based on that executive’s achievement of other balanced scorecard objectives). If the Company had achieved exactly the threshold level of EBITDA required to fund the BHS STIC (and no higher), the payout percentage would be the amount reflected in this column. The actual amounts paid, with respect to the BHS STIC, are described in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” above.

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2023

Employment Arrangements

We have entered into written arrangements with each of our continuing named executive officers governing the terms of their respective employment with us.

Rousseau Employment Agreement

We entered into an employment agreement with Mr. Rousseau, effective as of March 5, 2019, which we refer to as the Rousseau employment agreement. The Rousseau employment agreement provides that Mr. Rousseau will serve as our President and Chief Executive Officer. The Rousseau employment agreement has an initial term that ends on December 31, 2023 that automatically renews on an annual basis unless terminated in accordance with the Rousseau employment agreement. The Rousseau employment agreement also provides for (i) an initial salary of $800,000, subject to review for increase at least annually and (ii) eligibility to receive an annual bonus, with a target bonus equal to 100% of base salary. Mr. Rousseau is also entitled to participate in our employee benefit arrangements and to receive reimbursement for certain membership fees.

The Rousseau employment agreement contains restrictive covenants, including confidentiality of information, assignment of intellectual property, non-competition, employee no-hire, employee non-solicitation, client and customer non-solicitation, and mutual non-disparagement covenants. The confidentiality covenant and Mr. Rousseau’s covenant not to disparage us have an indefinite term (whereas our directors’ and executive officers’ obligation not to disparage Mr. Rousseau applies during employment and for three years following Mr. Rousseau’s termination of employment). The non-competition and non-solicitation covenants are effective both during Mr. Rousseau’s employment with us and until the 24-month anniversary of termination of employment for any reason.

The Rousseau employment agreement further provides for severance benefits, as described below under “Termination and Change in Control Arrangements” and “Potential Payments Upon Termination or Change of Control.”

It is anticipated that we will enter into an amendment to the Rousseau employment agreement that would, among other things, reflect an increase in his base salary to $1,000,000 (equal to his base salary as of May 16, 2023), subject to review for increase at least annually, an increase in his target bonus to 125% of his base salary (equal to his established target for 2023), an extension of the exercise period for his existing options, and the new equity awards being granted to Mr. Rousseau in connection with our IPO.

Mattingly Employment Agreement

We entered into an employment agreement with Mr. Mattingly, dated December 14, 2017, which we refer to as the Mattingly employment agreement. The Mattingly employment agreement provides that Mr. Mattingly will serve as the Chief Financial Officer for Res-Care, Inc. The Mattingly employment agreement has an initial term ending on December 31, 2018 that automatically renews on an annual basis unless terminated in accordance with the Mattingly employment agreement. The Mattingly employment agreement also provides for an initial annual base salary of $325,000, subject to adjustment from time to time. Mr. Mattingly is also entitled to participate in our employee benefit arrangements.

The Mattingly employment agreement contains restrictive covenants, including confidentiality of information, assignment of intellectual property, non-competition, employee non-solicitation, employee no-hire, client and customer non-solicitation, and mutual non-disparagement covenants. The confidentiality and mutual non-disparagement covenants have an indefinite term, and the non-competition, non-solicitation, and no-hire covenants are effective both during the executive’s employment and until the first anniversary of termination of employment for any reason.

The Mattingly employment agreement further provides for severance benefits, as described below under “Termination and Change in Control Arrangements” and “Potential Payments Upon Termination or Change of Control.”

Reed Employment Agreement

We entered into an employment agreement with Mr. Reed, effective as of May 1, 2014, which we refer to as the Reed employment agreement. The Reed employment agreement provides that Mr. Reed will serve as Chief Legal Officer and Corporate Secretary. The Reed employment agreement has an initial term of five years, unless earlier terminated in accordance with the Reed employment agreement. The Reed agreement also provides for (i) an annual base salary of $295,000, subject to annual review by the Chief Executive Officer or the Compensation Committee and (ii) eligibility to receive an annual bonus, with a target bonus equal to 100% of base salary. Mr. Reed is also entitled to participate in our employee benefit arrangements.

The Reed employment agreement contains restrictive covenants, including confidentiality of information, assignment of intellectual property, non-competition, employee non-solicitation, employee no-hire, client and customer non-solicitation, and non-disparagement covenants. The confidentiality and non-disparagement covenants have an indefinite term, and the non-competition, non-solicitation, and no-hire covenants are effective both during the executive’s employment and until the first anniversary of termination of employment for any reason.

The Reed employment agreement further provides for severance benefits, as described below under “Termination and Change in Control Arrangements” and “Potential Payments Upon Termination or Change of Control.”

Barnes Employment Agreement

We entered into an employment agreement with Mr. Barnes, effective as of July 9, 2018, which we refer to as the Barnes employment agreement, pursuant to which Mr. Barnes serves as our President, Community Health Services. The Barnes employment agreement provides for (i) an initial annual base salary of $400,000, subject to adjustment from time to time and (ii) eligibility to receive an annual bonus, with a target bonus equal to 60% of base salary. Mr. Barnes is also entitled to participate in our employee benefit arrangements.

The Barnes employment agreement contains restrictive covenants, including confidentiality of information, assignment of intellectual property, noncompetition, employee non-solicitation, employee no-hire, client and customer non-solicitation, and non-disparagement covenants. The confidentiality and non-disparagement covenants have an indefinite term, and the non-competition, non-solicitation, and no-hire covenants are effective both during the executive’s employment and until the 12-month anniversary of termination of employment for any reason.

The Barnes employment agreement further provides for severance benefits, as described below under “Termination and Change in Control Arrangements” and “Potential Payments Upon Termination or Change of Control.”

Yowler Employment Agreement

We entered into an employment agreement with Ms. Yowler, effective as of May 4, 2019, which we refer to as the Yowler employment agreement, pursuant to which Ms. Yowler serves as our President, PharMerica. The Yowler employment agreement provides for (i) an initial salary of $360,000, subject to adjustment from time to time and (ii) eligibility to receive an annual bonus, with a target bonus equal to 60% of base salary. Ms. Yowler is also entitled to participate in our employee benefit arrangements.

The Yowler employment agreement contains restrictive covenants, including confidentiality of information, assignment of intellectual property, non-competition, employee no-hire, employee non-solicitation, client, patient, and customer non-solicitation, and non-disparagement covenants. The confidentiality and non-disparagement covenants have an indefinite term, and the non-competition, non-solicitation, and no-hire covenants are effective both during the executive’s employment and until the 12-month anniversary of termination of employment for any reason.

The Yowler employment agreement further provides for severance benefits, as described below under “Termination and Change in Control Arrangements” and “Potential Payments Upon Termination or Change of Control.”

Outstanding Equity Awards at December 31, 2023

The following table provides information as of December 31, 2023, regarding the outstanding stock options held by our named executive officers. See “Long-Term Incentive Program” for more information.

(1)

With respect to Messrs. Mattingly, Reed, Barnes, and Ms. Yowler, reflects time-vesting stock options that vest as to 20% of such options on each of the first five anniversaries of March 5, 2019, with respect to grants made in 2019, and May 12, 2020, with respect to Mr. Barnes’ and Ms. Yowler’s 2020 grant.

(2)

For information on vesting upon specified termination events or change in control, see “Termination and Change in Control Arrangements” and “Potential Payments Upon Termination or Change of Control.”

(3)

Reflects performance-vesting stock options (of which half are 2.0x performance-vesting stock options and half are 2.5x performance-vesting stock options). The vesting terms of these performance-vesting stock options are described under “Elements of Compensation—What We Pay and Why—Long-Term Incentive Program.”

(4)

With respect to Mr. Rousseau, reflects time-vesting stock options that vest over five years, with 20% vesting on March 5, 2020, with an additional 5% vesting on each subsequent quarterly anniversary of that date. In November 2023, our Board of Directors approved the cancellation of 628,108 vested stock options held by Mr. Rousseau (215,912 stock options) and by an irrevocable trust for which Mr. Rousseau’s spouse serves as trustee (412,196 stock options) in exchange for a cash payment of $3,437,500 and $6,562,500, respectively.

(5)

With respect to Mr. Rousseau, reflects time-vesting stock options that vest 100% on the six month anniversary of grant, provided that the Company has not completed an initial public offering. If the Company has completed an initial public offering within six months of the date of grant, reflects time-vesting stock options that vest 1/3rd on the six month anniversary of the date of grant, with the additional time-vesting stock options vesting ratably and monthly over the next two years subsequent to the date of grant.

Options Exercised and Stock Vested

None of our named executive officers exercised any stock options during 2023. Stock options are the only form of equity award held by our named executive officers as of December 31, 2023.

Pension and Nonqualified Deferred Compensation Benefits

We did not offer pension benefits to our named executive officers during 2023. We offer nonqualified deferred compensation benefits to our named executive officers through our BrightSpring Health Services Nonqualified Deferred Compensation Plan, under which our named executive officers are permitted to defer up to 50% of their annual salary. Ms. Yowler is the only named executive officer who elected to defer compensation with respect to 2023.

Termination and Change in Control Arrangements

Severance Arrangements

Mr. Rousseau. Pursuant to the terms of the Rousseau employment agreement, if Mr. Rousseau’s employment is terminated (i) by us without “cause” (as defined in the Rousseau employment agreement) or (ii) for “good reason” (as defined in the Rousseau employment agreement), Mr. Rousseau will be entitled to receive the following severance payments and benefits, in addition to certain accrued obligations:

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An amount equal to 2.0x the sum of Mr. Rousseau’s (i) then-current base salary and (ii) target incentive bonus, payable in equal monthly installments over two years;

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Any earned but unpaid prior year annual incentive bonus, payable at the time that annual bonuses are paid to our employees in the ordinary course, which we refer to as the prior year bonus;

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A pro-rated annual incentive bonus for the year of termination, based on actual performance, and payable at the time that annual bonuses are paid to our employees in the ordinary course, which we refer to as the pro-rated bonus; and

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If Mr. Rousseau timely elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), continued health insurance coverage, at active employee rates, for 18 months following termination of employment or, if earlier, until the date on which Mr. Rousseau becomes eligible for health benefits from a subsequent employer.

Upon a termination of Mr. Rousseau’s employment as a result of the non-renewal of the term by us, Mr. Rousseau will be entitled to receive the following severance payments and benefits, in addition to certain accrued obligations:

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An amount equal to 2.0x Mr. Rousseau’s then-current base salary, payable in equal monthly installments over two years;

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Any prior year bonus; and

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If Mr. Rousseau timely elects continued coverage under COBRA, continued health insurance coverage, at active employee rates, for 18 months following termination of employment or, if earlier, until the date on which Mr. Rousseau becomes eligible for health benefits from a subsequent employer.

Upon a termination of Mr. Rousseau’s employment due to his death or as a result of his disability, Mr. Rousseau will be entitled to any prior year bonus and the pro-rated bonus.

Our obligation to provide the severance benefits described above (other than those payable upon a termination of Mr. Rousseau’s employment due to his death or as a result of his disability) are contingent upon Mr. Rousseau’s execution and non-revocation of a release of claims in favor of us and our affiliates.

Mr. Mattingly. Pursuant to the terms of the Mattingly employment agreement, if Mr. Mattingly’s employment is terminated (i) by us without “cause” (as defined in the Mattingly employment agreement) or (ii) for “good reason” (as defined in the Mattingly employment agreement), Mr. Mattingly will be entitled to receive the following payments and benefits, in addition to certain accrued obligations:

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An amount equal to 1.0x Mr. Mattingly’s then-current base salary, payable in equal installments in accordance with our payroll practice;

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A pro-rated annual incentive bonus, based on target performance, and payable at the time that annual bonuses are paid to our employees in the ordinary course; and

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If Mr. Mattingly timely elects continued coverage under COBRA, continued health insurance coverage, at active employee rates, for 12 months.

Our obligation to provide the severance benefits described above are contingent upon Mr. Mattingly’s execution of a release of claims in favor of us and our affiliates.

Mr. Reed. Pursuant to the terms of the Reed employment agreement, if Mr. Reed’s employment is terminated by us without “cause” (as defined in the Reed employment agreement), Mr. Reed will be entitled to receive the following severance payments and benefits, in addition to certain accrued obligations:

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An amount equal to 2.0x the sum of Mr. Reed’s then-current base salary, payable in a lump sum within 74 days of his termination date; and

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Any prior year bonus.

Upon a termination of Mr. Reed’s employment as a result of the nonrenewal of the term by us, Mr. Reed will be entitled to receive the following severance payments and benefits:

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An amount equal to 2.0x Mr. Reed’s then-current base salary, payable in equal installments; and

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Any prior year bonus.

Upon a termination of Mr. Reed’s employment due to his death or as a result of his disability, Mr. Reed will be entitled to any prior year bonus.

Our obligation to provide the severance benefits described above (other than those payable upon a termination of Mr. Reed’s employment due to his death or as a result of his disability) are contingent upon Mr. Reed’s execution and non-revocation of a release of claims in favor of us and our affiliates.

Mr. Barnes. Pursuant to the terms of the Barnes employment agreement, if Mr. Barnes’ employment is terminated (i) by us without “cause” (as defined in the Barnes employment agreement) or (ii) for “good reason” (as defined in the Barnes employment agreement), Mr. Barnes will be entitled to receive the following severance payment and benefits, in addition to certain accrued obligations:

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An amount equal to 1.0x Mr. Barnes’ then-current base salary, payable in equal installments in accordance with our payroll practice;

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A pro-rated annual incentive bonus, based on target performance, and payable at the time that annual bonuses are paid to our employees in the ordinary course; and

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If Mr. Barnes timely elects continued coverage under COBRA, continued health insurance coverage, at active employee rates, for 12 months.

Our obligation to provide the severance benefits described above are contingent upon Mr. Barnes’ execution and non-revocation of a release of claims in favor of us and our affiliates.

Ms. Yowler. Pursuant to the terms of the Yowler employment agreement, if Ms. Yowler’s employment is terminated (i) by us without “cause” (as defined in the Yowler employment agreement) or (ii) for “good reason” (as defined in the Yowler employment agreement), Ms. Yowler will be entitled to receive an amount equal to 1.0x Ms. Yowler’s then-current base salary, payable in equal installments in accordance with our payroll practice.

Our obligation to provide the severance benefits described above are contingent upon Ms. Yowler’s execution of a release of claims in favor of us and our affiliates.

Equity Awards

Termination without “cause,” by the executive for “good reason,” or as a result of death or disability

Mr. Rousseau. Pursuant to the 2019 stock option agreement with Mr. Rousseau, in the event of a termination of employment by us without “cause,” by Mr. Rousseau for “good reason,” or as a result of Mr. Rousseau’s death or disability, (i) a pro rata portion of the time-vesting options eligible to vest in the quarter of termination based on the number of days Mr. Rousseau was employed from the immediately preceding vesting date will vest, (ii) the remaining unvested time-vesting options will remain outstanding and eligible to vest upon the occurrence of a change in control within the nine-month period following the termination, and (iii) all performance-vesting options will remain outstanding and eligible to vest to the extent that the applicable performance vesting conditions are satisfied during the nine-month period following the termination. Pursuant to the 2023 stock option agreement with Mr. Rousseau, in the event of a termination of employment by us without “cause,” by Mr. Rousseau for “good reason,” or as a result of Mr. Rousseau’s death or disability, all then-unvested stock options become fully vested upon such termination.

Messrs. Mattingly, Reed, Barnes, and Ms. Yowler. There is no additional vesting (or eligibility to vest) in connection with a termination of employment with respect to the stock options held by Messrs. Mattingly, Reed, Barnes, or Ms. Yowler.

Change in control

Messrs. Rousseau, Mattingly, Reed, and Barnes, and Ms. Yowler. If a change in control (as defined in the stockholders agreement described under “Certain Relationships and Related Party Transactions”) occurs during the executive’s employment (i) the time-vesting options will become fully vested and exercisable immediately prior to the effective time of such change in control and (ii) all performance-vesting options that have not vested before the change in control and that will not vest in connection with the change in control shall be automatically forfeited in connection with the change in control (except in the case of a change in control that results in KKR Stockholder and its affiliates receiving any non-cash or cash equivalent proceeds as consideration, in which case a portion of the proceeds received by KKR Stockholder and its affiliates will be placed in escrow, subject to the original vesting terms of the performance-vesting options). Pursuant to the 2023 stock option agreement with Mr. Rousseau, in the event a change in control occurs during Mr. Rousseau’s employment, all then-unvested stock options become fully vested upon such change in control.

Termination of employment in connection with a change in control

Mr. Rousseau. In the event that Mr. Rousseau’s termination of employment is either at the request or suggestion of a potential acquirer or occurs on or after the date of entry into a binding letter of intent that (x) grants a buyer exclusivity for a period of time and (y) is for a transaction that would, if consummated, constitute a change in control, or a pre-CIC termination, (i) a pro rata portion of the time-vesting options eligible to vest in the quarter of termination based on the number of days Mr. Rousseau was employed from the immediately preceding vesting date will vest and the remaining unvested time-vesting options will remain outstanding and eligible to vest upon the consummation of the change in control to which such termination relates, even if the consummation occurs more than nine months following termination of Mr. Rousseau’s employment and (ii) all performance-vesting options will remain outstanding and eligible to vest to the extent that the applicable performance vesting conditions are satisfied in connection with the change in control to which such termination relates. Messrs. Mattingly, Reed, Barnes, and Ms. Yowler. There is no additional vesting (or eligibility to vest) in connection with a pre-CIC termination of employment with respect to the stock options held by Messrs. Mattingly, Reed, Barnes, or Ms. Yowler.

Potential Payments Upon Termination or Change of Control

The following table describes the potential payments and benefits that would have been payable to our named executive officers assuming an eligible termination (as described above under “Termination and Change in Control Arrangements”) of their employment on December 30, 2023 and a change in control also occurring on such date.

The amounts shown in the table below do not include:

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distributions of previously vested plan balances under our 401(k) Plan;

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amounts that may have been payable to a named executive officer upon the sale or purchase of his vested equity pursuant to the exercise of call rights, which rights expire in connection with our IPO; and

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payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of the named executive officers.

(1)

For purposes of the cash severance amounts in the table above, upon a termination of the named executive officer’s employment by us without “cause” or by the named executive officer for “good reason,” cash severance includes the following:

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Mr. Rousseau—2.0x the sum of his (x) then-current base salary ($1,000,000) and (y) target incentive bonus $1,000,000, as well as (i) any earned but unpaid prior year bonus and (ii) a pro-rated annual incentive bonus, based on actual performance for the year of termination. With respect to Mr. Rousseau’s pro-rated annual incentive bonus, achievement of target performance has been assumed.

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Mr. Mattingly—1.0x the sum of his then-current base salary ($424,598), as well as a pro-rated annual incentive bonus, based on target performance.

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Mr. Reed—2.0x the sum of his then-current base salary ($724,032), as well as any earned but unpaid prior year bonus.

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Mr. Barnes—1.0x the sum of his then-current base salary ($419,980), as well as a pro-rated annual incentive bonus, based on target performance.

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Ms. Yowler—1.0x the sum of her then-current base salary ($440,003).

For purposes of this column, we assume that there is no earned but unpaid prior year bonus outstanding.

(2)

Upon a termination of employment as a result of our non-renewal of the term of the applicable employment agreement, Messrs. Rousseau and Reed are entitled to (i) cash severance equal to 2.0x then-current base salary ($2,000,000 and $724,032, respectively) and (ii) any earned but unpaid prior year bonus. For purposes of this column, we assume that there is no earned but unpaid prior year bonus outstanding.

(3)

In the event of death or disability, Messrs. Rousseau and Reed are entitled to any earned but unpaid prior year bonus, and, in the case of Mr. Rousseau only, a pro-rated annual incentive bonus, based on actual performance for the year of termination. For purposes of this column, we assume that there is no earned but unpaid prior year bonus outstanding, and with respect to Mr. Rousseau’s pro-rated annual incentive bonus, achievement of target performance has been assumed.

(4)

Upon a change of control, unvested time-vesting stock options would become immediately vested. Amounts are based on the most recent valuation of the “fair market value” of a share of the Company’s common stock of $22.29 as determined as of December 31, 2023. With respect to the performance-vesting awards, no amounts have been reported in connection with a change in control as we have assumed that the performance-vesting options would not have vested because the performance condition would not have been satisfied. With respect to Mr. Rousseau only, upon a termination of his employment (i) by us without “cause,” (ii) by him for “good reason,” (iii) as a result of his death or disability, or (iv) as a result of a buyer’s request that his employment be terminated in connection with a change in control, in each case, a pro rata portion of his 2019 time-vesting options eligible to vest in the quarter of termination based on the number of days Mr. Rousseau was employed from the immediately preceding vesting date will vest. With respect to Mr. Rousseau only, upon a termination of his employment (i) by us without “cause,” (ii) by him for “good reason,” all of his then-unvested 2023 stock options vest upon his termination.

(5)

Amounts shown represent the estimated cost of providing the executive officer with continued medical insurance under COBRA for a period of 18 months, for Mr. Rousseau, and a period of 12 months, for Messrs. Mattingly and Barnes, in each case, assuming 2023 rates.

Director Compensation

We do not currently pay our directors any compensation, including any stock awards or option awards, for their service as directors. The compensation paid to Jon Rousseau, in his capacity as our President and Chief Executive Officer, is presented in the Summary Compensation Table and the related explanatory tables. All of our directors are reimbursed for their reasonable out-of-pocket expenses related to their service as directors.

We anticipate that we will review our director compensation program following the consummation of our IPO and make such changes, including the establishment of a compensation program for non-employee directors as we determine are necessary or appropriate for our status as a public company.

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee is a person who is or has been at any time one of our executive officers or team members. None of our executive officers serve or has served during the last completed year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or Compensation Committee.

We are parties to certain transactions with KKR Stockholder, Walgreen Stockholder and their respective affiliates described Item 12. “Certain Relationships and Related Party Transactions.”